Washington: US home-building fell more than expected in November, tumbling from a nine-year high as construction activity declined broadly, the latest sign of slower economic growth in the fourth quarter.
But the housing market remains on solid ground, with yesterday’s report from the Commerce Department showing permits for the future construction of single-family homes, the biggest segment of the market, rising to a nine-year high in November.
“The economy won’t be flying as high without new construction that leads to additional consumer purchases of furniture and appliances and cars. The economy has some risks to the downside,” said Chris Rupkey, chief economist at MUFG Union Bank in New York.
Ground-breaking on new housing projects dropped 18.7 percent to a seasonally adjusted annual rate of 1.09 million units, the Commerce Department said. Last month’s percentage decline was the largest in nearly two years, and unwound the bulk of October’s 27.3 percent surge.
Housing starts data are choppy month-to-month, with much of the volatility coming from the multi-family segment of the market. October’s starts were revised up to a 1.34 million-unit rate, the highest since July 2007, from the previously reported 1.32 million rate. Economists had forecast housing starts slipping to a 1.23 million-unit rate last month.
The report came on the heels of data this month showing a widening in the trade deficit in October and weak retail sales and industrial production in November. The Atlanta Federal Reserve is forecasting GDP rising at a 2.4 percent annualised rate in the fourth quarter after increasing at a brisk 3.2 percent rate in the third quarter.
Residential construction has been a drag on economic growth since the second quarter, but economists expect it will contribute to GDP this quarter. Despite the weak report, the PHLX housing index rose 0.4 percent, tracking a broadly firmer US stock market. Shares in the nation’s largest homebuilder, DR Horton, gained 0.6 percent and Lennar Corp advanced 0.3 percent.
US Treasury debt prices rose marginally, while the dollar was little changed against a basket of currencies after scaling a 14-year high on Thursday.
Starts fell in all four regions last month. October’s surge in home building had widened the gap between permits and starts. With last month’s drop in ground-breaking activity, building permits are now leading starts, which augurs well for the housing market.
