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US home construction rose last month, led by apartments

AP Economics Writer

WASHINGTON (AP) — U.S. developers broke ground on more houses last month, but the increase occurred entirely in the construction of apartments. The number of new single-family houses built decreased.

The Commerce Department said on Tuesday that the number of housing starts rose by 3.2 percent in November from the previous month to a seasonally adjusted annual rate of 1.26 million. Despite the increase, the figure was down by 3.6 percent from a year ago. The number of single-family starts decreased by 4.6 percent in November and is down by 13.1 percent from a year earlier.

Some of the data likely have been distorted by extreme weather. The number of houses built jumped by 15.1 percent last month in the South in the aftermath of hurricanes Florence and Michael. And house construction fell by 14.2 percent in the West, possibly because of wildfires in California. Specifically, single-family homebuilding in the West decreased by the greatest amount seen since February 2009.

Still, rising mortgage rates have dragged down home sales in the past year, discouraging many builders and leading to a slump in the housing market. Sales of new and existing homes are dropping and home price gains are slowing.

The unemployment rate is at a five-decade low and incomes are rising faster than they have been in a long time. But many would-be buyers struggle to find homes they can afford.

Developers are saying that rising labor and materials costs are making it harder for them to build more affordable properties.

“Rising home prices and mortgage rates have created high hurdles for homebuyers, while cost increases have made it difficult for builders to deliver homes at the most in-demand price points,” said Danielle Hale, chief economist at realtor.com.

Sales figures for new homes plummeted by nearly 9 percent in October even as the number of newly built, unsold homes sitting on the market has climbed to its highest level since 2009.

Meanwhile, an index of home builders’ confidence has fallen sharply over the last two months. On Monday, the National Association of Home Builders said the index dropped last month to its lowest level in 3 ½ years.

Mortgage rates shot up to nearly 5 percent in early November, the highest level in seven years. The average rate on a 30-year fixed mortgage has fallen back since then, hitting 4.6 percent last week. Still, that is up from an average of 3.9 percent a year earlier.

The construction of apartment buildings has soared in the past year, rising 20 percent nationwide. That could help keep rents in check.

But single-family home building creates more jobs and economic activity and is closely watched by economists. This sort of construction requires more labor than other kinds and leads to more purchases of furniture and appliances. The number of single-family homes built plunged by 13.1 percent in November from the same month a year earlier.

The number of building permits for single-family homes ticked up 0.1 percent last month, suggesting that the construction of those homes will level off in the coming months. Overall, the number of permits issued rose by 5 percent last month and 0.4 percent from a year ago.

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