November homebuilding sets brisk pace

WASHINGTON - U.S. builders broke ground on homes in November at the fastest pace in more than five years, strong evidence to economists that the housing recovery is accelerating.

The Commerce Department said Wednesday that developers began construction on houses and apartments last month at a seasonally adjusted annual rate of 1.09 million. That’s 23 percent more than October’s pace of 889,000 and the fastest since February 2008, just a few months after the recession began.

Construction of single family homes jumped 21 percent to an annual pace of 727,000, also the highest in more than five years. Apartment construction soared 26 percent to a 354,000 annual pace.

Permits for future building slipped 3 percent to just over 1 million, down from 1.04 million in October. The drop reflected a decline in apartments, which can be volatile. Permits for single family homes rose.

“Evidently, builders in the field are genuinely confident about the outlook for sales of new single-family houses, despite the rise in mortgage rates,” said Pierre Ellis, an economist at Decision Economics.

The housing market has been improving steadily since early last year, but construction had leveled off this summer after first reaching an annual pace of 1 million in March. Last month’s surge comes as mortgage rates remain about a percentage point higher than they were in the spring. That suggests home building will help spur economic growth in the final three months of the year.

“The economy seems to be picking up and there’s quite a lot of pent-up demand,” said David Sloan, a senior economist at 4Cast Inc. in New York.

Higher home prices, political discord in Washington and rising interest rates have contributed to a cooling in demand, according to Robert Toll, chairman and co-founder of luxury-home builder Toll Brothers Inc.

“We believe this leveling of demand will prove temporary based on still significant … demand, the gradual strengthening of the economy and the improving prospects of our affluent customers,” Douglas Yearley Jr., Toll’s chief executive officer,said in a statement.

The average rate on a 30-year mortgage fell to 4.42 percent last week. That’s down from a peak of 4.6 percent in August.

Rates jumped by more than a full percentage point after Federal Reserve Chairman Ben Bernanke said in May that the Fed would eventually pull back on its $85 billion bond-buying program. The Fed decided Wednesday to begin tapering its bond purchase beginning in January.

Home construction soared in the Midwest and South, while it fell in the Northeast and rose modestly in the West.

The surge comes as home builders are more confident. The National Association of Home Builders/Wells Fargo builder sentiment index, released Tuesday, matched an eight-year high first reached in August.

Though new homes represent only a fraction of the housing market, they have an outsize effect on the economy.

Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to NAHB statistics.

“Housing has started to recover, but we are still very much in the early stages,” said Patty Bedient, executive vice president and chief financial officer at lumber supplier Weyerhaeuser Co. in Federal Way, Wash.

“While the exact shape of the recovery is difficult to predict, there’s really no disagreement that the overall direction is up,” Bedient said on a Tuesday conference call with investors. “We believe housing will be very positive going forward.” Information for this article was contributed by Christopher S. Rugaber of The Associated Press and by Lorraine Woellert and Kristy Scheuble of Bloomberg News.