U.S. housing starts surge to highest level since May

So-called housing starts rose to 1.56 million annual pace from 1.36 million in November, the government said Tuesday. That’s how many houses would be built over an entire year if construction took place at the same rate in every month as it did in November.

Housing starts were last at this level in May 2023. But starts are down from a peak of 1.8 million in April 2022. 

The data exceeded expectations on Wall Street, where the expected rate was 1.36 million. The numbers are seasonally adjusted.

Both single-family construction and multi-family were up in November.

In a more recent survey of builders in December, builders were more optimistic about home-buying demand, yet continued to slash prices in November to keep shoppers interested. 

A drop in mortgage rates in mid-December may provide a further boost to starts and new home sales in the coming months.

Building permits, a sign of future construction, fell 2.5% to a 1.46 million rate. 

Key details: The construction pace of single-family homes rose by 18% in November, and apartment building rose by 8.9%.

Single-family housing starts rose to the highest level since April 2022.

Builders heavily ramped up construction in the Northeast, where overall housing starts doubled in November. Other regions reported more modest increases.

Single-family housing starts only fell in the West, by 0.8%. 

Permits for single-family homes rose 0.7% in November and permits for buildings with at least five units or more fell by 9.6%.

Around 1.69 million homes were under construction as of November. 

Big picture: The jump in housing starts in November reflects strong buyer demand in the face of falling mortgage rates.

A drop in mortgage rates in mid-December could provide a further boost to starts in the coming months. With the U.S. Federal Reserve signaling multiple rate cuts in 2024, the 30-year mortgage rate fell even further, below 7% for the first time since August. Buyers waiting on the sidelines could see it as an opportunity to buy a home as home loans become more affordable. 

Builders may consequently ramp up housing starts as demand picks up. 

What are they saying? “Housing starts exploded higher in November, surging by nearly 15% to a 1.56 million unit annualized pace, the best reading since May and second-best in a year and a half,” Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, wrote in a note.  

“The pullback in mortgage rates over the last month or so has already helped to bring potential buyers back into the search process.  … [but] the supply of existing homes on the market remains extremely low, even as demand is perking up,” he added. “Homebuilders could not ask for a better setup, as they will be relied upon to provide the bulk of the supply that potential buyers require.”

Another warned that November’s figure may be an aberration.

“A little bit of drama in U.S. housing starts today,” Ali Jaffery at CIBC Economics wrote in a note. 

“Housing starts have been volatile in recent months,” he explained. “While mortgage rates have eased substantially since their peak in late October, today’s release likely reflects noise rather than the influence of gradually improving demand. We expect a pullback next month.”

Market reaction: U.S. stocks
DJIA

SPX
were up early Tuesday. The yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was below 4%.