WASHINGTON -- Construction of new homes climbed 13.7 percent in October, the biggest jump in a year as builders broke ground on more apartments and single-family houses. A pickup in permit applications for single-family homes indicates building will remain firm in coming months.
The Commerce Department said Friday that the monthly gain put U.S. housing starts at a seasonally adjusted annual rate of 1.29 million units. That is the best pace for home construction in 12 months.
Housing starts have risen just 2.4 percent year-to-date, largely because fewer apartment complexes are being built. Single-family house construction has driven much of the growth this year in a sign of greater demand from buyers amid a healthy job market.
But recent building trends reversed themselves somewhat in October, with most of the momentum coming from apartment construction. The building of multifamily properties jumped 37.4 percent in October. Construction of single-family houses increased 5.3 percent.
Still, the building of new homes has done little to alleviate the growing shortage of existing homes for sale. This shortage has started to stifle the broader real estate market. Purchases of existing homes have fallen over the past 12 months, according to the National Association of Realtors. The decline largely reflects that there were 121,600 fewer homes on the market during the same period, a 6.4 percent decrease that new construction has been unable to offset.
"For a significant increase in new homes, municipalities are going to have to work harder to make more land available for building," said Robert Frick, a corporate economist with Navy Federal Credit Union.
Construction in the South rose 17.2 percent last month, a sign the region is regaining its footing after damage from Hurricanes Harvey and Irma. Home construction shot up in the Northeast because of groundbreakings for apartments. Construction also increased in the Midwest but declined in the West.
Building permits, an indicator of future construction, rose 5.9 percent in October to 1.3 million.
The report showed building permits for single-family homes improved in October to an 839,000 annualized pace, the fastest since September 2007. Construction spending, which subtracted from gross domestic product in the second and third quarters, may add to U.S. economic growth over the final three months of the year on the heels of rebuilding efforts after the two hurricanes.
A gauge of homebuilders' confidence surged this month to an eight-month high, indicating optimism about the outlook amid sustained demand, boosted by the steady job market and relatively low mortgage costs.
At the same time, the industry is dealing with a shortage of workers, higher materials prices and difficulty finding ready- to-build lots. Economists expect residential construction will keep expanding gradually.
Groundbreaking on multifamily buildings climbed to an annual rate of 413,000; these monthly data typically experience large swings.
The number of homes authorized but not yet started rose to 152,000 in October, the most since June 2015. Houses under construction in October totaled 1.1 million, the most in a decade, and single-family properties the most since July 2008.
Information for this article was contributed by Bloomberg News.
Business on 11/18/2017