US home construction edges higher in November

Construction of new US homes rose for the second straight month in November, with the volume of single-family houses started hitting a 10-year record, according to government data released Tuesday.

The upward movement brought the pace of total home building to a 13-month high, driven in large part by soaring construction in the fire-stricken western US, the Commerce Department said in its monthly report.

The supply of housing in the pipeline tightened, however, with permits for new building falling slightly.

Analysts say supply in the US housing market has failed to keep pace with the demand produced by the current economic recovery and November's results suggested natural disasters are still driving some gains in construction.

"Homebuyers hoping for a large boost in new housing supply as a holiday gift are likely disappointed with today's homebuilding numbers, as both permits and completions were down in November," Ralph McLaughlin, chief economist at Trulia, said in a research note.

But he said would-be homeowners should "despair not" as inventory was likely to rise in 2018, with permits, starts and completions all trending higher this year over their 2016 levels.

Housing construction started last month rose 3.3 percent over October to a seasonally-adjusted annual rate of 1.3 million units, the second straight monthly increase and the highest level since October of last year.

The result overshot analyst expectations and put the pace of construction 12.9 percent over November of last year.

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The key single-family home category saw even stronger starts, with a 5.3 percent increase, rising to 930,000 units -- the highest since September 2007, when the US housing bubble was approaching its peak.

The numbers are subject to a high degree of uncertainty and revision, however, and the monthly changes are significantly smaller than the estimated margin of error.

With the winter months arriving, construction nose-dived by nearly 40 percent in the Northeast and fell nearly 13 percent in the Midwest.

But the pace of new building surged 11.1 percent in the South, where Texas homeowners are rebuilding from Hurricane Harvey.

And construction in the West, where fires have ravaged residential areas, jumped 11.4 percent.

Building permits, a sign of supply in the pipeline, fell 1.4 percent to a seasonally-adjusted annual rate of 1.29 million, largely in line with analyst expectations.

Ian Shepherdson of Pantheon Macroeconomics noted that the impending passage of Republican tax legislation could slow construction of higher-end homes in high-tax states, as lawmakers are poised to limit federal deductions on local property taxes and mortgage interest.

"But the national picture looks solid," he said in a client note.