Housing Starts Rebound in November

Housing starts rose 8.9% in November to a 574,000 seasonally adjusted annual pace, the U.S. Commerce Department announced recently. A Bloomberg News economists’ survey had expected housing starts to total a slightly higher 575,000 annualized rate for the month. They totaled a revised 527,000 annual pace in October, and a 586,000 annual pace in September. New home construction hit a cycle low of 479,000 in April.

In November, starts of single-family homes rose 2.1% to a 482,000 annual rate, but multifamily units (five units or more) surged 62.7% to an 83,000 annual rate.

Economists follow the housing start statistic because of the large role residential real estate has played historically in the U.S. economy. Housing affects commerce in companion sectors, such as furniture, appliances, insurance and landscaping, among others. Hence, a sustained increase in housing starts usually gives upward lift to U.S. GDP.

November proved to be good month for housing starts, and the rise will be welcomed by economists, business executives and realtors alike, especially after October’s decline. The U.S. housing market remains in recovery mode. Moreover, with moderate prices, and the renewed $6,500 to $8,000 home buyers’ federal income tax credit — $8,000 for first-time buyers, $6,500 for current home owners — two legs are in place to maintain the sector’s modest momentum.

The third leg? Looser credit. If banks or mortgage lenders loosen credit, more potential buyers will come forward to take advantage of decent prices and purchase homes in 2010 — something that would further stimulate U.S. GDP growth.