Housing starts as of the end of November were at a seasonally adjusted annual rate of about 1.297 million, an increase of 3.3% compared with a revised 1.256 million in October and an increase of 12.9% compared with about 1.149 million in November 2016, according to estimates released by the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
Starts of single-family homes were at a rate of about 930,000, an increase of 5.3% compared with a revised rate of about of 883,000 in October. Starts of multifamily homes (five units or more per building) were at a rate of about 359,000, an increase of 0.8% compared with about 356,000 in October.
Regionally, combined single- and multifamily housing production rose 19% in the West and 11.1% in the South. However, starts fell 12.9% in the Midwest and 39.6% in the Northeast.
Building permits in November were at an annual rate of about 1.298 million, a decrease of 1.4% compared with a revised estimate of 1.316 million in October but an increase of 3.4% compared with about 1.255 million in November 2016.
Permits for single-family homes were at a rate of about 862,000, an increase of 1.4% compared with a revised 850,000 in October. Permits for multifamily homes were a rate of about 395,000 in November, a decrease of 8.8% compared with about 433,000 in October.
“The year-over-year increase in housing starts is good news for the housing market, as starts are the source of future completions, meaning an increasing amount of new housing supply is on the way,” says Mark Fleming, chief economist for First American Financial Corp., in a statement. “Housing completions have just begun to keep up with new household formation this past quarter. While new household formation has remained relatively steady, the past two quarters have seen an increase, specifically a shift from renter-occupied to owner-occupied households, as millennials age into homeownership.”
“While housing completions decreased this month, the increase in housing starts will be good news for future completions, signaling some relief for the supply shortage in 2018,” Fleming adds.
As Fleming points out, the lack of home building during the past several years is a major reason why the market has been strained by a lack of inventory.
“Homebuilders continue to struggle to find skilled labor, especially framers, and buildable lots remain in short supply,” he says.
Granger MacDonald, chairman of the National Association of Home Builders (NAHB), says the increase in single-family starts is consistent with the recent increase in home builder confidence.
It shows that “builders are optimistic about new federal policies aimed to promote small business growth,” he says in a statement.
“The strong November reading indicates that builders are continuing to increase single-family production to meet growing demand for housing,” adds Robert Dietz, chief economist for NAHB. “With low unemployment and increasing owner-occupied household formation, single-family starts should continue to make gains in 2018.”