Construction sped up to a five-year high in November as home builders increased inventory to keep up with demand. According to the Commerce Department, housing starts jumped 22.7 percent, or 1.09 million at an annualized rate.
Even though mortgage rates have risen, home builders are still optimistic with the decline in existing inventories. “The economy seems to be picking up and there’s quite a lot of pent-up demand,” said David Sloan, senior economist at 4Cast Inc. The housing sector will be in focus today as the Federal Reserve will determine whether to taper or not, which includes current purchases of $40 billion mortgage-backed securities (MBS) per month.
Housing starts beat general consensus of 950K and October’s print of 890K. Single family housing starts increased 20.8 percent, or 727K in November. Figures were the highest since March 2008 and beat October’s numbers of 602K housing starts. Multifamily housing increased 25.8 percent to an annual rate of 364K.
The Midwest region and the South seen the highest increase of 41.7 and 38.5 percent respectively. The West region climbed only 8.8 percent, while the Northeast continues to struggle and fell 29.4 percent.
Demand is still present, but it has tapered off the second half of the year. Mortgage rates, according to Freddie Mac, on a 30-year fixed rate was 4.42 percent in the week ending on December 12 opposed to 3.32 percent from a year ago.
“While the exact shape of the recovery is difficult to predict, there’s really no disagreement that the overall direction is up,” said Patty Bedient, executive VP and CFO at lumber supplier Weyerhaeuser Co.