Housing starts grow and construction permits hit 12-year high

November saw a seasonally adjusted annual rate of 1.365 million housing starts, an increase of 3.2% above the revised October estimate.

That’s according to the latest data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. The November 2019 rate was 13.6% above the annual rate of 1.202 million units in November 2018.

“The robust growth in home construction highlighted in the November data is quite welcome,” said Mike Fratantoni, senior vice president and chief economist for the Mortgage Bankers Association. “For the last few years, the lack of inventory has constrained the pace of home sales and increased the rate of home-price growth, leading to affordability challenges across the country. November’s strong monthly and annual gains indicate that potential homebuyers next year will have more properties to choose from.”

Single-family housing starts this past November came in at an annualized rate of 938,000, up 2.4% from the October 2019 revised rate. On a year-to-date basis, single-family starts are now only 0.4% lower compared to the same period in 2018.

The strongest growth in single-family housing starts was in the West region, which had a 33% year-over-year increase, Fratantoni noted. The South also saw a strong increase relative to 2018, but single-family starts in the region were actually down month over month in November.

“These two regions account for the bulk of housing construction nationwide, so the trends there are key to watch,” he said.

Building permits also offered encouraging signs in November, with a seasonally adjusted annual rate of 1.482 million for the month. That’s a 12.5-year high, signaling that homebuilding activity is beginning to speed up and keep pace with household formations, according to Odeta Kushi, deputy chief economist at First American Financial Corp.

“The continued increase in permits indicates that the pace of construction should stay strong in early 2020,” Fratantoni said. “The solid permits reading is confirmed by the incredibly strong read on builder sentiment, which came in yesterday at the strongest level since June 1999.”

“Even better is the single-family permits data, [which] at 918,000, reached its highest point since July 2007,” Kushi added. “Permits are a leading indicator of future starts, so this is another nod to the expected strength of demand in 2020.”

November’s data follows a trend of increasing single-family permits that began this past April. Robert Dietz, chief economist for the National Association of Home Builders, said that his organization expects “additional single-family growth, as areas beyond the exurbs respond to for-sale housing demand and healthy labor markets.”


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