By Timothy R. Homan
WASHINGTON - Builders broke ground in November on the most houses in over a year, led by a three-year high on work in multifamily units, a sign the market is stabilizing heading into 2012.
Starts increased 9.3 percent to a 685,000 annual rate, exceeding the highest estimate of economists surveyed by Bloomberg News and the highest level since April 2010, Commerce Department figures showed Tuesday in Washington. Building permits, a proxy for future construction, also climbed to a more than one-year high.
Work on multifamily units like apartments and townhouses is surging as the rental market improves. Single-family-home construction is strengthening as lower home prices and borrowing costs hovering near a record low draw in some buyers, even as builders face competition from existing houses as another wave of foreclosures throws more marked-down properties on the market.
“It’s a solid report,” said Brian Jones, a senior U.S. economist at Societe Generale in New York, who had the highest forecast in the Bloomberg survey. “For months we’ve been flagging the strength in multifamily construction, but now we’re starting to get signs that single-family is pulling itself off the canvas.”
Stock-index futures held earlier gains after the report. The contract on the Standard & Poor’s 500 Index maturing in March rose 1.3 percent to 1,214.1 at 8:46 a.m. in New York. Treasury securities fell, sending the yield on the benchmark 10-year note up to 1.85 percent from 1.81 percent late Monday.
The median estimate of 79 economists surveyed by Bloomberg called for a gain to 635,000 from a previously reported 628,000 annual rate. Estimates ranged from 600,000 to 655,000. The Commerce Department revised the October reading down to 627,000.
The November results compare with last year’s overall tally of 587,000 starts, the second-fewest on record. Home construction totaled 554,000 units in 2009, the lowest since record-keeping began in 1959.
Permits increased to a 681,000 annual pace in November, the highest level since March 2010. They were projected to fall to a 635,000 rate from 644,000 the prior month, according to the survey median. Applications for the construction of single-family homes climbed 1.6 percent, and permits for multifamily units jumped 14 percent.
New construction of single-family houses rose 2.3 percent from the prior month to a 447,000 annual rate, the most since June. Work on multifamily homes surged 25 percent to an annual rate of 238,000, the highest level since September 2008.
Recent gains in homebuilding have been led by gains in construction of apartments and other multifamily dwellings as foreclosures turned more Americans into renters from buyers.
“Multifamily construction is experiencing a mini-boom as Americans shift from buying to renting,” Ryan Sweet, a senior economist at Moody’s Analytics Inc. in West Chester, Pa., said before the report. “Homebuilders still compete with a glut of cheaply priced foreclosed homes, but their own inventory is nearing historic norms in relation to sales.”
Three of four regions had a November increase in starts, led by a 54 percent jump in the Northeast and a 23 percent gain in the West. Starts fell 18 percent in the Midwest.
Purchases of new houses rose 1.3 percent in October, as discounted prices lured in some buyers, Commerce Department figures show. Sales of previously owned homes, which now make up about 94 percent of the market, increased 1.4 percent that same month, according to the National Association of Realtors.
The Obama administration this month started a new version of the federal Home Affordable Refinance Program, or HARP, after the original program helped less than a quarter of the people targeted to lock in lower mortgage rates.
Federal Reserve policy makers reiterated at a meeting this month that they will keep the benchmark interest rate near zero until at least 2013. The central bank in September decided to reinvest maturing housing debt into new mortgage-backed securities instead of Treasuries.
Some policy efforts may be contributing to signs of improvement in the housing market. A report Monday showed the National Association of Home Builders/Wells Fargo index of builder confidence rose in December for a third straight month, to 21, the highest level since May 2010. Readings below 50 mean more respondents said conditions were poor.
“November is a time that historically sales slow down,” Larry Sorsby, chief financial officer at Hovnanian Enterprises Inc., said in a Dec. 15 call with analysts. “And this year we’ve not seen as dramatic a slowdown as we have in recent prior years. The market feels a little bit better than we would have expected.”