A worker measures wood for a house under construction at the KB Home Vineyard Crossing Community in Livermore, California.
David Paul Morris | Bloomberg | Getty Images
USA. Residential construction rebounded in October and future housing approvals reached more than 12-year highs, indicating a strength of the housing market with lower mortgage rates. Tuesday's Ministry of Commerce report also showed an increase in housing completions and in the number of homes under construction, which could help mitigate a supply bottleneck that plagued the real estate market.
"This is an important report for prospective homebuyers, as one of the biggest obstacles to the current market entry is the lack of robust housing options," said Bill Banfield, executive vice president of Capital Markets at Quicken Loans in Detroit.
Housing starts rose 3.8% last month to a seasonally adjusted annual rate of 1
September data has been revised to show that housing construction dropped back to a pace of 1.266 million units instead of a 1.266 million unit decline, as previously reported. Economists interviewed by Reuters had predicted that the number of residential units would rise to 1.320 million in October.
The number of residential units rose in October compared to the previous year by 8.5%. Building permits rose 5.0% in October to 1.461 million units, the highest level since May 2007. Permits came from the single-family home segment, which rose 3.2% to its highest level since August 2007.
Building permits in the densely populated South region reached its highest level in more than 12 1/2 years last month.
The real estate market, which is most sensitive to interest rates, has picked up in recent months and the Federal Reserve caught up with a simple monetary stance that has pushed down mortgage rates from the multi-year highs of last year.
However, the sector, which accounts for some 3.1% of the economy, continues to be burdened by labor and labor shortages.
A poll on Monday showed home builder confidence in November was close to a 1/2-year high. However, the builders complained of "labor shortages and legal requirements," adding that "the lack of land, especially for custom builders, poses a serious problem."
The data has moved the financial markets little.
Housing starts reached a more than 12-year high in August. However, momentum may slow as mortgage rates rose again in the last two months.
The Fed cut interest rates last month for the third time this year, signaling a break in the easing cycle that began in July, when it lowered the cost of borrowing the euro for the first time since 2008.
The recession has slowed in recent months as trade tension between the United States and China worsened, with economic activity slowing in the face of slowing consumer spending and ongoing weakness in corporate investment and manufacturing.
The 30-year fixed mortgage rate currently stands at 3.75%, below its high of 4.94% in November 2018, according to mortgage lender Freddie Mac.
Residential investment rebounded in the third quarter after six consecutive quarters , the longest period since the 2007-2009 recession.
Single-family housing construction, which accounts for the largest share of the housing market, increased by 2.0% to a rate of 936,000 units in October, the highest in nine months. The number of single-family homes in the West, Midwest and South has risen in the last month. They fell to the northeast.
The launches for the volatile segment of multi-family dwellings rose 8.6% to 378,000 units in October. Permits for multi-family housing construction rose 8.2% last month to 552,000 units.
The completion of the apartments increased last month by 10.3% to 1.256 million units. Real estate agents estimate that housing starts and completions must be in the range of 1.5 million to 1.6 million units per month to fill the inventory gap.
The number of dwellings under construction increased by 0.1% to 1.161 million units, the highest since January.