The Commerce Department announced today that November new housing starts resulted in a seasonally adjusted annual rate of 1.3 million units, with single-family houses being the biggest driver with an 8.7% increase so far this year. This is the fastest pace of single-family housing starts since September 2007, right before the start of the Great Recession.
Unemployment is at a 17-year low, and mortgage rates still remain historically attractive. Freddie Mac reported that 30-year fixed rate US mortgages averaged 3.93% last week, an improvement from 4.16% a year ago. This creates a healthy demand from buyers; however, the number of existing properties being listed for sale has dropped 6.4% over the past year. The resulting shortfall is being partially filled through new construction. A key driver for new home construction has been the listing of fewer existing properties for sale. Regionally, new construction growth last month was mainly in the South and West. Declines were reported in the Northeast and Midwest.
Previously, the building of apartment rentals was a major force in the growth of residential construction. However, multi-family building ground breakings are down 8.5% year-to-date. Observers attribute this to the Millennial population “aging out” of renting and transitioning into owning their own homes.
A key leading indicator of future construction – building permits authorized – is up 5.8% year-to-date but was down 1.4%, to 1.3 million, in October.