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 Permits to build houses and apartments were approved at a seasonally
adjusted annual rate of 1.034 million, the Commerce Department said
Tuesday. That's 6.2 percent higher than the September rate of
974,000 and the fastest since June 2008, just before the peak of the
financial crisis.
Nearly all of the increase was for multi-family homes, a part of
residential construction that reflects rentals and can be volatile
from month to month. Those permits rose 15.3 percent to a rate of
414,000, also the fastest since June 2008. Plans for construction in
the U.S. south drove much of the increase.
Permits for single-family houses, which make up roughly two-thirds
of the market, rose 0.8 percent to a rate of 620,000. That's still
slightly below the August pace of 627,000. And it suggests that
higher prices and borrowing costs are weakening buyer demand.
Data on homes started in October and September were not included in
Tuesday's report. Those figures have been delayed because of the
government shutdown and will be released on Dec. 18 with the
November home construction report.
The increase in permits suggests those figures will rise. And it
indicates that "housing construction will make a much bigger
contribution" to economic growth in the final quarter of the year,
said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
But the sales of single-family homes could soon slow in the coming
months, if developers don't see greater demand soon, Shepherdson
said.
"The flat trend in single-family is ominous," he said in a client
note.
Construction of apartments has increased in the aftermath of the
Great Recession, as the rate of homeownership has fallen from its
2006 peak of 69 percent to 64 percent. Lingering unemployment and
stagnant incomes for millions of Americans have increased demand for
rentals, which are at their lowest vacancy rates since early 2001.
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Builders are also benefiting from a low supply of homes for sale,
which has increased prices for sellers.
The rise in permits also suggests builders mostly shrugged off the
partial government shutdown, which lasted from Oct. 1 through Oct.
16. The shutdown was blamed for delaying the release of the October
and September housing data. And it continued to effect the
government's reporting on homes started for those months.
Most economists expect the housing recovery will withstand an
increase in borrowing costs. But the higher costs have slowed home
sales in recent months.
Fixed mortgage rates have risen almost a full percentage point since
late May, when borrowing costs were near record lows. Last week, the
average on the 30-year loan was 4.22 percent, according to mortgage
buyer Freddie Mac.
Mortgage rates are still low by historical standards. And steady job
gains have made it possible for more Americans to buy homes.
Homebuilder confidence tailed off slightly after the government
closed in October, according to a survey by the National Association
of Home Builders. Their optimism flagged slightly out of concern
that the shutdown and possibility another fiscal crisis at the start
of next year will keep potential homebuyers on the sideline.
Though new homes represent only a fraction of the housing market,
they have an outsize impact on the economy. Each home built creates
an average of three jobs for a year and generates about $90,000 in
tax revenue, according to NAHB statistics.
[Associated
Press; JOSH BOAK, AP Economics Writer]
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