Dec. 20 (Bloomberg) -- Builders broke ground in November on the most houses in over a year, a sign that 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 today in Washington. Building permits, a proxy for future construction, also climbed to a more than one- year high.
The increase in construction last month was led by a jump in work on multifamily units like apartments and townhouses as the rental market improves. The building of single-family homes is beginning to strengthen as falling 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.
“There’s continued demand for custom homes and construction costs are very low now,” John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston, said before the report. At the same time, he said, “housing is still kind of going to bounce along the bottom for a while. There’s at least one more large wave of foreclosures.”
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. Work on multifamily homes, such as townhouses and apartment buildings, surged 25 percent to an annual rate of 238,000.
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, Pennsylvania, 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 yesterday 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.”
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