Housing Starts Rebound in November

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Housing starts rose 8.9% in November to a 574,000 seasonally adjusted annual pace, the U.S. Commerce Department announced Wednesday. A Bloomberg News economists' survey had expected housing starts to total a slightly higher 575,000 annualized rate for the month. They totaled a revised 527,000 annual pace in October, and a 586,000 annual pace in September. New home construction hit a cycle low of 479,000 in April.%%DynaPub-Enhancement class="enhancement contentType-HTML Content fragmentId-1 payloadId-61603 alignment-right size-small"%%

Further, although housing starts are up 3.2% for the first 11 months of 2009, analysts caution that any increases stem from a very low point with depressed construction levels, following the nation's worst housing recession in more than a generation. So, at least during the initial stage of the recovery, large percentage gains in housing starts will be relatively easy to achieve.

In November, starts of single-family homes rose 2.1% to a 482,000 annual rate, but multifamily units (five units or more) surged 62.7% to an 83,000 annual rate.

What's more, in the past 12 months, housing starts were down 12.4%, but single-family homes were up 5.5%. The 12-month housing start decline may seem large, but it's still an improvement over October's 30.7% rate.

Another key metric is building permits, and they rose 6% in November to a seasonally adjusted annual rate of 584,000. Single-family permits rose 5.3% to a 473,000 rate. Apartment and condo permits were flat at 86,000.

Economic Analysis

Economists follow the housing start statistic because of the large role residential real estate has played historically in the U.S. economy. Housing affects commerce in companion sectors, such as furniture, appliances, insurance and landscaping, among others. Hence, a sustained increase in housing starts usually gives upward lift to U.S. GDP.

However, economists also caution that monthly housing start data contain a large margin of error and revisions can be arge.

November proved to be good month for housing starts, and the rise will be welcomed by economists, business executives and realtors alike, especially after October's decline. The U.S. housing market remains in recovery mode. Moreover, with moderate prices, and the renewed $6,500 to $8,000 home buyers' federal income tax credit -- $8,000 for first-time buyers, $6,500 for current home owners -- two legs are in place to maintain the sector's modest momentum.

The third leg for the stool? Looser credit. Mortgage-qualifying terms remain less than optimal. If banks or mortgage lenders loosen credit, more potential buyers will come forward to take advantage of decent prices and purchase homes in 2010 -- something that would further stimulate U.S. GDP growth.
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