After a shaky October, homebuilding ramped up in a big way last month.
Housing starts, or the beginning of construction on new homes, rose 10.5 percent in November, according to data released Wednesday by the Commerce Department. The surge nearly erased a 12 percent decline reported for October.
October’s swoon was cited as one potential trouble point for the Federal Reserve raising interest rates. The strong growth in November comes just before the Fed’s likely announcement today for a December rate hike.
"Homebuilding may not keep the Fed from 'liftoff' but it will be their biggest concern. When Fed officials say they want to see more investment spending this recovery, they really mean residential housing construction," Chris Rupkey, chief financial economist at MUFG Union Bank, told Reuters in November, following the release of October’s housing data.
In October, groundbreaking fell to a seasonally adjusted annual pace of 1.06 million – the lowest since March. Still, October was the seventh consecutive month starts remained above the annualized pace of 1 million units, the longest stretch since pre-recession 2007.
November saw groundbreaking rise to an annual pace of 1.17 million units, according to the Commerce Department. Building permits rose 11 percent, single-family authorization increased 1.1 percent, and single-family housing starts rose 7.6 percent from October levels. Privately-owned housing completions fell 3.2 percent from last month, but are still above November 2014 levels (9.2 percent above).
“Robust building permits, combined with still reasonably elevated homebuilder optimism, provide a foundation for continued momentum in housing starts,” Kristin Reynolds, an IHS Global Insight economist, said in an e-mailed statement. “We expect starts to reach a 1.3-million annualized rate in the second half of 2016 with single-family starts responsible for most of the gain.”
The Federal Reserve will announce later this afternoon its decision on whether to raise interest rates, a move that will have an impact on the housing market in the coming year.
The decision will be based on a myriad of factors and the Fed will be looking for “further evidence that the US economy is stable and headed in the right direction (even if slowly),” The Christian Science Monitor’s Schuyler Velasco wrote earlier this month in a a piece on the November jobs report.
The US economy added 211,000 jobs in November, the 69th consecutive month of job growth. November was also the eighth straight month housing starts remained above an annualized pace of 1 million.