U.S. Housing Starts Rose 8.2% in November, Permits Up
By Siobhan Hughes
Washington, Dec. 18 (Bloomberg) -- U.S. housing starts surged in November, led by work on homes, apartments and condominiums, as mild weather enabled builders to step up construction even during the first recession in a decade.
Builders broke ground at an annual pace of 1.645 million homes last month, up 8.2 percent from a 1.521 million-unit rate in October, the Commerce Department said. Analysts had expected a 1.54-million-unit rate, based on the median of 46 forecasts in a Bloomberg News survey.
Construction has moved forward because mortgage rates are low enough to lure buyers, preserving home sales as an island of strength in a flagging economy. Warm temperatures also enabled Beazer Homes USA Inc., Toll Brothers Inc. and other builders to work off backlogs that are at record levels or close.
``Weather and low mortgage rates are both helping quite a bit,'' said David Weiss, chief financial officer at Beazer, in an interview. ``There was a shortage of housing coming into this recession, so where other businesses have had excess capacity or excess inventory coming into this recession, home inventory levels coming into this were the lowest they've ever been.''
The November pace was the fastest since July, and the increase was the largest since starts rose 8.7 percent in January. October starts had previously been reported at a 1.552 million- unit pace.
Builders have become increasingly optimistic. The National Association of Home Builders reported yesterday that its housing market index surged to 57 in December from 49 in November, the biggest monthly increase since February 1998. A reading of 50 signals that a majority of builders are optimistic.
Multifamily Surge
The November figures suggest builders will start 1.605 million units in 2001, for the second-best year since 1986.
``There is an underlying message of confidence here,'' said Christopher Low, chief economist at First Tennessee Capital Markets in New York. ``If builders are taking advantage of warm weather to build homes, they are clearly confident that they can sell them.''
Stocks and Treasury securities gained. The Dow Jones Industrial Average rose 20 points, or 0.2 percent, and the Nasdaq Composite Index rose 11 points, or 0.5 percent. The Treasury's 5 percent note maturing in August 2011 rose 1/4 point, pushing down its yield 3 basis points to 5.16 percent.
Starts of single-family homes rose 3.2 percent in November to a 1.261 million-unit rate. November starts of multifamily homes rose 28.4 percent to a 384,000 annual rate.
Building permits, an indicator of future construction, rose 5.3 percent to 1.564 million units at an annual rate, the fastest pace since August.
Regional Breakdown
By region, starts rose 20.1 percent in the Northeast to 173,000 units at an annual pace, 20.5 percent in the Midwest to 382,000, and 12.7 percent in the West to 372.000. Starts fell 1.6 percent in the South to an annual rate of 718,000.
November housing completions, meantime, fell 1.6 percent to 1.518 million units at an annual rate from 1.543 million in October.
Beazer Homes, the No. 8 U.S. builder, had 3,977 houses on order and waiting to be built at Sept. 30, a record backlog. Toll Brothers Inc., the largest U.S. builder of luxury houses, had a backlog of 2,727 as of Oct. 31, not far from the 2,779 a year earlier.
While the average rate on a 30-year mortgage rose to 7.09 percent last week, the rate is still below the five-year high of 8.64 percent in mid-May 2000.
Some Obstacles
The biggest obstacle for builders is rising unemployment, which threatens to erode optimism and, with it, the willingness to make expensive purchases. The jobless rate increased to 5.7 percent in November, and almost 800,000 workers lost their jobs in the two months following the Sept. 11 terrorist attacks.
Stewart Cline, president of builder Morrison Homes, a U.S. division of Britain's George Wimpey Plc, has noticed a cooling in home sales. ``The summer months were very difficult for us, and then after Sept. 11 everybody really stepped back,'' he said in an interview yesterday.
The company's home sales have returned to pre-Sept. 11 levels, ``and we think that once the job cuts are over, then people who have a job will tend to feel better about a large purchase, so we are hoping that's coming along soon,'' Cline said.
Morrison builds four- and five-bedroom houses mainly for second-time buyers in Florida, Texas, Arizona and California.
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