WASHINGTON – More applications for home construction were issued in October than at any time in the past five years, a sign the U.S. residential real-estate market is gaining momentum heading into 2014.
Building permits increased 6.2 percent in October to a 1.03 million annualized rate, the most since June 2008, after a September pace of 974,000, figures from the Commerce Department showed Tuesday in Washington. The median estimate of 47 economists surveyed by Bloomberg was for a 930,000 rate. Figures for housing starts, which usually accompany the permits data, are delayed until Dec. 18 because last month’s government shutdown prevented the agency from gathering the data in time.
The improvement over the past two months was paced by a surge in applications for multifamily housing that indicates growing demand for either rental units or condominiums. Improvement in the housing market may continue as a pickup in employment offsets higher borrowing costs, rekindling demand for new homes as existing inventories remain tight.
“The economy is getting better,” said Brian Jones, senior U.S. economist at Societe Generale in New York, whose forecast for a rate of 985,000 permits was the highest in the Bloomberg survey. “Certainly the multi-family numbers are telling you it’s time to build.”
Stock-index futures were little changed after the report. The contract on the Standard & Poor’s 500 Index maturing in December was at 1,802.8 at 8:50 a.m. in New York.
Estimates for building permits in the Bloomberg survey ranged from 875,000 to 985,000.
Permits for multifamily units climbed 15.3 percent in October to a 414,000 pace, the most since June 2008, and followed a 20.1 percent jump in September. Excluding a surge related to a change in New York City’s building code that took effect in July 2008, applications would have been the strongest since November 2007, the month before the last recession began.
Single-family building permits climbed 0.8 percent last month to a rate of 620,000.
The Commerce Department is postponing the release of housing starts data due to the government shutdown, the agency said last week in an emailed statement. November permits data will be also be released on Dec. 18, along with starts for that month and the previous two.
Revisions for August and July housing starts were also issued with Tuesday’s report. Work began on 883,000 homes at an annualized rate in August, indicating construction will probably accelerate along with permits.
Two of four regions had an increase in building permits in October, led by a 15.4 percent jump in the West, according to the report. Permit issuance also rose in the South, declined 9.6 percent in the Midwest and was little changed in the Northeast.
On a year-to-year basis, building permits were up 13.9 percent last month.
Mortgage rates that jumped 1 percentage point in less than two months crimped affordability for some homebuyers, weighing on demand, though rates have since stabilized. The average rate for a 30-year, fixed-rate mortgage was 4.22 in the week ended Nov. 21, down from a recent peak of 4.58 percent on Aug. 22, according to Freddie Mac, in McLean, Va.
Federal Reserve officials are keeping an eye on the housing market as they consider scaling back their $85 billion-a-month bond-buying program, known as quantitative easing. Policy makers last week signaled they may taper “in coming months” if the economy improves as anticipated, according to the record of the Federal Open Market Committee’s Oct. 29-30 gathering, released Nov. 20 in Washington.
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