November witnessed a remarkable surge in new construction activities, propelled by a decline in mortgage rates that boosted homebuilder sentiment. The escalating confidence among developers led to groundbreaking on new construction projects, marking the swiftest pace achieved in half a year.
Data from the Census Bureau revealed that housing starts in November surpassed expectations, reaching an adjusted annual rate of 1.56 million, outstripping the projected figure of 1.36 million by economists. Notably, November’s results exhibited a nearly 15% increase compared to October’s adjusted reading of 1.36 million, indicating a substantial upturn. Moreover, these figures were 9% higher than the housing starts recorded during the same period the previous year.
Specifically focusing on single-family homes, the increase was an impressive 18% compared to the preceding month, marking the highest number of housing starts since May.
However, the issuance of building permits, an important indicator of future construction, fell slightly below projections at 1.46 million, down from October’s revised figure of 1.5 million.
Chief Economist at LPL Financial, Jeffrey Roach, pointed out that the improved housing starts indicate a rapid response from builders to meet the escalating demand for new housing. Despite the impact of high borrowing costs, construction activity remained robust. Roach highlighted that the surge in activity extended to both single-family and multi-family housing units.
The majority of housing starts were observed in the South, attributed to the ongoing trend of hybrid work, which continues to drive households towards regions offering a lower cost of living.
These robust figures signify positive momentum within the housing market, which has grappled with challenges such as high mortgage rates and affordability issues. Homebuilder sentiment exhibited an uptick in December for the first time in four months. Additionally, the Mortgage Bankers Association projected a 6% rise in existing home sales and a substantial 10% surge in new home sales over the upcoming year.
This optimistic outlook follows indications from Federal Reserve Chair Jerome Powell, suggesting a potential halt in interest rate hikes. The Fed’s efforts to combat inflation had previously led mortgage rates to spike to nearly 8% during the fall, marking the highest rates seen in over two decades.
