The Commerce Department reported today that U.S. housing starts surged 22.7% from October to a seasonally-adjusted annual rate of 1,091,000, exceeding even the most optimistic forecasts. Starts for single-family homes rose 20.8% in November to a rate of 727,000, the highest rate since March 2008. Starts on multi-family units rose 26% to an annual rate of 354,000. Even with the rebound, the pace of new construction is still falling short of the estimated 1.5 million new homes per year needed to keep pace with population growth and to replace aging housing stock.
Confidence among U.S. homebuilders increased more than forecast, climbing to the highest level in eight years. The National Association of Home Builders sentiment gauge rose to 58 in December from 54 in November. Index readings of greater than 50 means more respondents report good market conditions. A measure of current demand climbed to the highest level since December 2005, while gauges of sales prospects and buyer traffic also picked up, indicating that housing will be a source of strength for the economy next year. “The recent spike in mortgage rates has not deterred consumers as rates are still near historically low levels,” said David Crow, chief economist at the builders association. “This uptick is due in part to a release of pent-up demand caused by the uncertainty generated by the October government shutdown. We continue to look for gradual recovery in the year ahead,” he said.
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