New-home construction exceeded a 1 million annualized pace in November for a third consecutive month, continuing a slow recovery in the housing market.
While housing starts declined 1.6% to a 1.03 million annualized rate, they retreated from a 1.05 million pace in October that was stronger than previously estimated, figures from the Commerce Department showed today in Washington. The median estimate of 76 economists surveyed by Bloomberg was for a 1.04 million rate. The last time starts exceeded 1 million for three months straight was in early 2008.
The decrease in starts was focused in the South as other area showed gains, and building permits also decreased last month, a sign housing will remain in a plodding recovery into 2015. Continued job gains and lower mortgage rates will probably support demand as first-time and younger buyers still struggle to get into the market.
“All the conditions for stronger residential investment are in place for 2015,” said Ryan Sweet, a senior economist at Moodys Analytics Inc. in West Chester, Pa., who forecast starts would slow to a 1.03 million pace. “An improving job market is going to do wonders for the housing market.”
Stock-index futures fell as concerns about the impact of sliding oil prices spread through financial markets before a meeting of Federal Reserve policy makers this week. The contract on the Standard Poors 500 Index maturing in March dropped 0.5% to 1,973.6 at 8:49 a.m. in New York.
Estimates for housing starts in the Bloomberg survey ranged from 900,000 to 1.1 million. Building permits declined 5.2% in November to a 1.04 million annualized rate after an October pace of 1.09 million. They were projected to fall to 1.07 million within a range of 1.01 million to 1.1 million.
Construction of single-family houses decreased to a 677,000 rate, the report showed. Work on multifamily homes, such as apartment buildings, climbed 6.7% to a 351,000 rate. Work on these projects is often volatile.
Only the South showed a drop in starts, falling 19.5% in November. The West jumped 28.1% on a surge in multifamily projects.
On a year-to-year basis, total housing starts were down 7.5% in November from the same month in 2013 before adjusting for seasonal changes.
The housing recovery has progressed in fits and starts this year, with historically low mortgage rates and the strongest job gains since 1999 slowly luring buyers into the market. The average 30-year, fixed-rate mortgage was 3.93% in the week ended Dec. 11, down from 4.53% at the start of January, according to data from Freddie Mac.
As the run-up in home prices decelerates and lending standards become less strict, homeownership may become more attainable for many Americans. Starting Dec. 13, Fannie Mae is allowing lower down payments for first-time buyers and permitting borrowers who are refinancing to reduce equity to 3% to cover closing costs.
That may help the outlook for homebuilders including Hovnanian, whose Chief Executive Officer Ara Hovnanian called 2014 a “disappointing year for the housing industry” after fiscal fourth-quarter adjusted earnings missed expectations.
“The housing market this past year has been more challenging,” Hovnanian said on a Dec. 10 conference call. “Ultimately, demographics are in our favor, and consumers should buy homes at an increased rate in the future. Simply put, the population in number of households in the U.S. is growing, and the nation is building fewer homes today than it needs to meet demand over the long term.”
A report yesterday showed confidence among U.S. homebuilders hovered in December close to a nine-year high, with the National Association of Home Builders/Wells Fargo sentiment gauge slipping to 57 from 58 in November.