Ahead of the Bell: US Housing Starts
WASHINGTON (AP) — U.S. builders likely slowed down a bit last month after beginning construction on the most new homes in more than four years in September.
The figures may also be distorted by Superstorm Sandy, which disrupted business along the East Coast in the final days of the month.
Economists forecast that builders broke ground on new homes and apartments at a seasonally adjusted annual rate of 840,000 in October. That's down from September's pace of 872,000, the most since July 2008.
The Commerce Department will release the report at 8:30 a.m. EST Tuesday.
In September, construction of single-family homes also rose to the highest level in four years. Apartment construction, which can be volatile from month to month, also jumped.
Applications for building permits, a good sign of future construction, soared nearly 12 percent to an annual rate of 894,000, another four-year high.
Housing starts are 82.5 percent above the annual rate of 478,000 in April 2009, the recession low. That's still well short of the 1.5 million annual rate considered healthy. Still, reports on Monday suggested that the housing recovery is sustainable and is adding to economic growth.
Builder confidence rose to its highest level in six and a half years, according to a survey by the National Association of Home Builders/Wells Fargo. Their index of builder sentiment rose to 46 this month, up from 41 in October. It was the highest reading since May 2006, just before the housing bubble burst.
Readings below 50 signal negative sentiment about the housing market. The index has been rising since October 2011, when it was 17. It has surged 27 points in the past 12 months, the sharpest annual increase on record.
Sales of previously occupied homes rose 2.1 percent to 4.79 million in October, the National Association of Realtors said. Sales are near their highest level in five years, excluding temporary spikes in 2009 and 2010 when a homebuyer tax credit boosted purchases.
A key factor fueling the gains is a gradually improving economy, which has increased the number of people looking for homes. At the same time, fewer homes are available for sale. The low supply is helping push up prices.
In addition, mortgage rates have hit all-time lows. And rents are rising, making the purchase of a single-family home or condominium more attractive.
Though new homes represent less than 20 percent of the housing sales 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 data from the home builders group.