Home builders capped their best three months of the year in November as the pace of new home construction continued to top levels rarely seen since 2008.
Builders broke ground on new homes at a seasonally adjusted annual rate of 1.03 million last month, off 1.6% from October, the Commerce Department said Tuesday. But October’s rate was revised up to 1.05 million from 1.01 million.
November marked the third straight month this year that the annual rate topped 1 million. The last time that happened was in the first half of 2008, but housing starts were in freefall then from levels above 2 million two years earlier, according to Census data from Haver Analytics. From 2009 through 2013, the annual rate averaged 692,000 starts a month.
Novermber’s annualized pace was close to economists’ median forecast in Action Economics’ survey. It was 7% below the 1.1 million level in November 2013, the highest annual rate in any month since 2008.
Economists found Tuesday’s report’s underwhelming.
“The housing sector is neither too hot nor too cold. But that doesn’t make it just right. Activity is improving, but in fits and starts — pardon the pun,” said Joel Naroff of Naroff Economic Advisors.
Economist David Nice, of Mesirow Financial, called the overall housing market disappointing in the fifth year of an economic recovery. Until wages grow faster than their current annual rate of about 2%, demand for new homes will remain lackluster, he said.
For the year to date, housing starts are up 8.2%. Much of that growth has been in multi-family construction, which is 16.5% ahead of last year. Single-family home construction is up 4.4%.
In November, single-family home-building fell to an annual rate of 677,000, down 5.4% from October’s revised rate.
Permits — a gauge of builders’ construction plans — fell about 5% from October’s revised annual rate, but at 1.04 million, they were close to this year’s average.
Housing starts last month rose almost 9% from October’s level in the Northeast, 14% in the Midwest and 28% in the West. They fell nearly 20% in the South — normally the leading region for home builders.
The housing starts data is famously volatile, however, and significant revisions in the monthly reports are common.
Builders seem generally optimistic about the year ahead.
The National Associated of Home Builders/Wells Fargo builder sentiment index slipped a little in December but it is still pointing toward confidence. The index reading in December was 57, down one point from a reading of 58 in November.
Readings higher than 50 indicate that home builders view sales conditions as good, rather than poor.