WASHINGTON – U.S. housing starts and permits fell in November, but remained at levels consistent with a gradually improving housing market.
Groundbreaking declined 1.6 percent to a seasonally adjusted annual pace of 1.028 million units, the Commerce Department said on Tuesday. October’s starts were revised up to a pace of 1.045 million units.
Economists polled by Reuters had forecast starts rising to a rate of 1.04 million units from October’s previously reported pace of 1.01 million units.
Yields for U.S. Treasuries held at lower levels, while the dollar was little changed against a basket of currencies. U.S. stock futures were pointing to a lower open also as crude oil prices continued to drift lower. Housing continues to be stymied by tepid wage growth, which has been far outpaced by home price increases. Higher mortgage rates are also a constraint, although they have declined from a peak reached in September 2013.
The housing recovery also is being challenged by a very slow pace of household formation, as high unemployment among young adults is forcing many to either continue living at home with their parents or share quarters with friends or relatives.
Household formation is currently running at about 500,000 a year, far below the more than 1 million that would signal a strong housing market recovery.
But with job growth accelerating, wages are expected to pick up next year and pull in first-time buyers, especially young people, into the housing market, providing a tailwind for the economy. Housing has been a mild boost to gross domestic product so far this year.
“With labor market conditions continuing to be favorable … we believe that it will be only a matter of time before the housing recovery shifts up a gear or two and provides a crucial second wind to the economic recovery,” said Millan Mulraine, deputy chief economist at TD Securities in New York.
Last month’s drop in groundbreaking was concentrated in the single-family homes segment, the largest part of the market, which fell 5.4 percent to a 677,000-unit rate. Single-family starts had posted two straight months of hefty gains.
Starts for the volatile multi-family homes segment increased 6.7 percent to a 351,000-unit pace. The increase unwound some of October’s 9.9 percent drop.
Multi-family starts continue to be driven by demand for rental units as many financially-strapped Americans shun home ownership.
Last month, permits dropped 5.2 percent to a pace of 1.035 million units after two straight months of gains. That was the biggest drop since January.
Permits, which lead starts by three to four months, have been above a pace of 1 million units since July.
Permits for single-family homes fell 1.2 percent to a 639,000-unit pace in November. Permits for multi-family housing tumbled 11 percent to a 396,000-unit pace. That followed two months of big increases.
(Reporting by Lucia Mutikani; Editing by Paul Simao) Copyright (2014) Thomson Reuters. Click for restrictions.