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The U.S. housing market has defied recent economic uncertainties, with single-family housing starting soaring to an 18-month high in November. The Commerce Department’s latest report reveals a remarkable 18.0% surge, reaching a seasonally adjusted annual rate of 1.143 million units—the highest level since April 2022.
Experts attribute this unexpected surge to a combination of factors, including a decline in mortgage rates and enticing incentives from builders. The Federal Reserve’s recent decision to keep interest rates steady has also played a role, with the 30-year fixed mortgage rate averaging 6.95% last week, the lowest since August. This marks a significant drop from the 7.79% high observed in late October.
The housing boom is not uniform across the nation. While the Northeast, Midwest, and densely populated South experienced substantial growth in single-family homebuilding, the West saw a decline. Unusually warmer temperatures and dry conditions likely contributed to the overall positive activity as well.
Notably, permits for future construction of single-family homes increased by 0.7% to a pace of 976,000 units in November—reaching the highest level in a year and a half. This suggests that the momentum in the housing market could extend into the coming months.
Economists are closely watching these developments as they could prompt an upgrade in GDP growth estimates for the fourth quarter. Current estimates, ranging from 1.0% to 2.6%, may see adjustments due to the unexpected resilience in the housing sector. The economy grew at a robust 5.2% rate in the third quarter.
While single-family housing is thriving, the report indicates a moderation in activity for housing projects with five units or more. Builders are navigating through a sizable stock of apartment buildings under construction, leading to an 8.9% rise in this category. However, demand for rental accommodation is cooling, reflected in a rising rental vacancy rate.
Despite challenges in the apartment sector, the overall picture is one of optimism. The housing market’s resilience, coupled with builder confidence bouncing back, sets a positive tone. The anticipation of lower borrowing costs in 2024, as signaled by the Federal Reserve, adds to the favorable outlook for the U.S. real estate landscape.
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