Housing starts in the U.S. came in below economist estimates in the month of November, according to a report released by the Commerce Department on Wednesday, although the report also showed a notable increase in building permits.
The report said housing starts fell 3.0 percent to an annual rate of 861,000 in November from the revised October estimate of 888,000. Economists had been expecting housing starts to fall to 865,000 from the 894,000 originally reported for October.
With the drop, housing starts gave back some ground after reaching their highest level since July of 2008 in the previous month.
Robert Kavcic, an economist at BMO Capital Markets, said, "Keep in mind that growth in housing starts was extremely strong in the prior 3 months (a 160,000 annualized increase), so some giveback is not a concern at this point, especially given what permits did in November."
The Commerce Department said building permits rose 3.6 percent to an annual rate of 899,000 in November from the revised October rate of 868,000.
Building permits, an indicator of future housing demand, had been expected to climb to 875,000 from the 866,000 originally reported for October.
The much stronger than expected monthly increase lifted building permits to their highest annual rate since July of 2008.
The Commerce Department said the drop in housing starts largely reflected a decrease in single-family starts, which fell 4.1 percent to an annual rate of 565,000.
Meanwhile, the November rate for buildings with five units or more was 285,000, up by 1.4 percent compared to the previous month.
The report also showed a notable decrease in housing starts in the Western region, which tumbled by 19.2 percent in November.
Housing starts in the Northeast also fell by 5.2 percent, while starts in the Midwest and the South rose by 3.3 percent and 2.9 percent, respectively.
Despite the monthly decrease, housing starts remain 21.6 percent above the annual rate seen in November of 2011. Building permits are also up by 26.8 percent year-over-year.
"With one month to go in the year, housing starts are on pace to average about 775,000 units in 2012, up 27% from 612,000 last year," BMO's Kavcic said. "And, with household formation running above 1 million per year again, there is more upside in 2013."
On Tuesday, the National Association of Home Builders released a related report showing that U.S. homebuilder confidence improved for the eighth consecutive month in December.
The report showed that the NAHB/Wells Fargo Housing Market Index climbed to 47 in December from a revised 45 in November. Economists had expected the index to edge up to 47 from the 46 originally reported for the previous month.
With the increase, the housing market index rose to its highest level since reaching a reading of 51 in April of 2006.
by RTT Staff Writer
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