US housing starts unexpectedly rise to a 6-month high

NEW-HOME construction in the United States unexpectedly surged in November to a six-month high, benefiting from a dearth of existing houses on the market and suggesting that the crunch in residential real estate is easing.

Residential starts increased 14.8 per cent last month to a 1.56 million annualised rate, government data showed on Tuesday (Dec 19). The median forecast in a Bloomberg survey of economists called for a 1.36 million pace.

Construction of single-family houses jumped 18 per cent to the highest level since April 2022. 

Permit applications, an indicator of future construction, decreased to a 1.46 million pace.

Builders are benefiting from a shortfall in listings of previously owned homes, enticing buyers with incentives such as subsidised mortgage rates and price cuts. That has helped ease the pain of the worst affordability on record. 

While mortgage rates are twice as high as they were at the end of 2021, just before the Federal Reserve started to tighten monetary policy, borrowing costs have slumped in the past six weeks. The average rate on a 30-year fixed mortgage has dropped back below 7 per cent for the first time since August, according to the latest data from Freddie Mac.

The annualised pace of new-home starts is on par with pre-pandemic rates, suggesting that the toll on gross domestic product from weak residential investment is beginning to ease. 

Figures on Monday showed builder sentiment increased this month for the first time since July on a pickup in prospective-buyer traffic and a more sanguine sales outlook.

All regions reported increased housing starts in November, including a 16.3 per cent jump in the South. New construction doubled in the North-east, and rose 2.1 per cent in the West and 1.4 per cent in the Midwest.

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The number of homes completed rose 5 per cent to a 1.45-million pace. The level of one-family properties under construction also increased.

Before the report, outlays for home construction were seen barely subtracting from fourth-quarter growth, according to the Atlanta Fed’s GDPNow estimate.

Data on new-home sales for November will be issued on Dec 22 and provide further clues on demand.