Construction on new U.S. homes soared last month to the fastest pace since early 2008, signaling that the housing market’s recovery is shaking off rising mortgage rates, according to government data released this week. Housing starts leaped 22.7% in November, backed by surges for both single-family homes and apartments, the U.S. Department of Commerce said.
Builders, meanwhile, are becoming increasingly perky, with a gauge of their views on present sales of single-family homes recently hitting the highest level since 2005, according to the National Association of Home Builders and Wells Fargo. In fact, builder confidence is climbing so quickly that it is outpacing actual construction rates for single-family homes.
Even the Federal Reserve’s announcement this week that it is tapering the asset purchases that have exerted downward pressure on long-term rates didn’t shake home-builder stocks.
What’s behind the cheery outlook among builders and their investors? Perhaps, like our central bankers, they are increasingly confident in the economy’s strength. If healthy jobs growth continues, homeownership should also pick up, benefitting new construction.
Builders also have a lot of room to expand: Housing starts hit a seasonally adjusted annual rate of 1.09 million in November, far below the 1.7 million starts per year that economists say are needed to maintain current stock and meet demand for replacement and second homes. Indeed, there’s enough demand that builders have been able to raise prices, though recent data signal that this trend is curbing sales.
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