Housing Starts Up 8.9% in November But Builders Still Skittish on Future

Dec. 18, 2009
Nationwide housing production rose 8.9 percent to a seasonally adjusted annual rate of 574,000 units in November

Nationwide housing production rose 8.9 percent to a seasonally adjusted annual rate of 574,000 units in November, according to figures released by the U.S. Commerce Department. The gain represented a partial bounce-back from an exceptionally slow month for housing activity in October, and was largely attributed to a big increase on the multi-family side.

“The fact that both starts and permits for new housing production rose last month is a good sign that we’re headed in the right direction, albeit slowly, on the road to a housing recovery,” said Joe Robson, chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, Okla. “That said, the November improvement was primarily on the multi-family side, and poor job markets and other economic factors are still keeping many potential buyers on the fence for the time being.”

“Home builders remain very cautious about starting new homes, and overall housing production is still down on a three-month average basis,” noted NAHB Chief Economist David Crowe. “Understandably, it will take some time for the newly extended and expanded home buyer tax credit to start boosting sales in individual markets — just as it did the last time such an incentive was enacted. However, the fact that permits increased in November is a hopeful indication that the desired impact of the tax credit on housing demand may be forthcoming early in 2010. In the meantime, credit for new housing production remains extremely difficult to come by, posing significant obstacles to builders with viable projects.”

Single-family housing starts made up some of the ground they lost in October, posting a modest 2.1 percent gain to a seasonally adjusted annual rate of 482,000 units in November. Meanwhile, multi-family starts rebounded from an all-time record low in the previous month with a 67.3 percent gain to a seasonally adjusted annual rate of 92,000 units in November.

While the housing starts data pointed toward an improving market, another housing market indicator showed that builders are still somewhat pessimistic about market conditions. According to the latest NAHB/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built, single-family homes receded one point to 16 points in December, its lowest reading since June, Any number over 50 indicates that more builders view sales conditions as good than poor.

“As we anticipated, this is shaping up to be a bumpy recovery period for the housing market,” added NAHB’s Crowe. “While some families may be just starting to factor the expanded tax credit into their potential home buying plans, many are hesitating because of the poor economy. At the same time, tight lending conditions for both consumers and home builders continue to pose considerable obstacles on the road to a sustained housing and economic recovery.”

Related

Photo 226496518 / Mohd Izzuan Ros /Dreamstime
Iillustration 19276996 / Dirk Erck / Dreamstime