Housing construction rises by 8.2 percent in November

By Jeannine Aversa

Associated Press

WASHINGTON – Housing construction jumped by 8.2 percent in November to the highest level since July as builders bet that low mortgage rates would continue to lure prospective buyers.

Builders broke ground last month on a seasonally adjusted annual rate of 1.65 million housing units, an 8.2 percent increase over October’s level, the Commerce Department reported Tuesday.

On Wall Street, the news lifted stocks. The Dow Jones industrial average was up 80 points and the Nasdaq gained 15 in the first hour of trading.

The bigger-than-expected increase in housing construction came even as consumer confidence fell to a 7 1/2-year low in November and the employment picture worsened. The nation’s unemployment rate climbed from 5.4 percent to 5.7 percent and payrolls fell sharply.

Low mortgage rates are a key reason that the housing and construction markets have remained stable even as the national economy has been suffering through a recession since March.

The average interest rate on a 30-year fixed-rate mortgage was 6.7 percent in November, compared with 7.7 percent for the same month a year ago.

Builders say low interest rates and solid appreciation in housing values are motivating new home buyers.

A survey released Monday by the National Association of Home Builders cited these factors as reasons that builders are more optimistic about sales prospects for December as well as within the next six months.

“The very favorable interest-rate environment and strong investment potential of homeownership are proving to be powerful incentives for buyers whose jobs have not been impacted by recent economic weakness,” said Bruce Smith, president of the National Association of Home Builders.

Still, “builders remain concerned about the situation in some markets, particularly in the Midwest, where job losses have been most concentrated,” Smith added.

The 8.2 percent rise in housing construction, which followed a 4 percent drop in October, pushed the level of starts to the highest point since July, when they grew at a rate of 1.66 million units.

In addition to low mortgage rates, economists said, mild weather in November was a factor in the increase.

In November, construction of single-family homes rose 3.2 percent to a rate of 1.26 million units, after registering a 3.4 percent decline the month before.

Construction of apartments, condominiums and other multifamily housing soared by 30.1 percent last month to a rate of 346,000, following a 2.9 percent drop in October.

By region, housing starts rose by 20.1 percent in the Northeast to a rate of 173,000. In the Midwest, they grew by 20.5 percent to a rate of 382,000, and in the West, starts rose by 12.7 percent to a rate of 372,000. But in the South, they fell by 1.6 percent to a rate of 718,000.