Build­ing per­mits de­cline 4.7%; sin­gle-fam­ily rise

Kuwait Times - - BUSINESS -

WASH­ING­TON: US home­build­ing fell more than ex­pected in Novem­ber, tum­bling from a nine-year high as con­struc­tion ac­tiv­ity de­clined broadly, the lat­est sign of slower eco­nomic growth in the fourth quar­ter. But the hous­ing mar­ket re­mains on solid ground, with Fri­day’s re­port from the Com­merce Depart­ment show­ing per­mits for the fu­ture con­struc­tion of sin­gle-fam­ily homes, the big­gest seg­ment of the mar­ket, ris­ing to a nine-year high in Novem­ber.

“The econ­omy won’t be fly­ing as high with­out new con­struc­tion that leads to ad­di­tional con­sumer pur­chases of fur­ni­ture and ap­pli­ances and cars. The econ­omy has some risks to the down­side,” said Chris Rup­key, chief econ­o­mist at MUFG Union Bank in New York.

Ground­break­ing on new hous­ing projects dropped 18.7 per­cent to a sea­son­ally ad­justed an­nual rate of 1.09 mil­lion units, the Com­merce Depart­ment said. Last month’s per­cent­age de­cline was the largest in nearly two years, and un­wound the bulk of October’s 27.3 per­cent surge.

Hous­ing starts data are choppy month-to-month, with much of the volatil­ity com­ing from the multi-fam­ily seg­ment of the mar­ket. October’s starts were re­vised up to a 1.34 mil­lion-unit rate, the high­est since July 2007, from the pre­vi­ously re­ported 1.32 mil­lion rate. Economists had fore­cast hous­ing starts slip­ping to a 1.23 mil­lion-unit rate last month.

The re­port came on the heels of data this month show­ing a widen­ing in the trade deficit in October and weak re­tail sales and in­dus­trial pro­duc­tion in Novem­ber. The At­lanta Fed­eral Re­serve is fore­cast­ing GDP ris­ing at a 2.4 per­cent an­nu­al­ized rate in the fourth quar­ter af­ter in­creas­ing at a brisk 3.2 per­cent rate in the third quar­ter. Res­i­den­tial con­struc­tion has been a drag on eco­nomic growth since the sec­ond quar­ter, but economists ex­pect it will con­trib­ute to GDP this quar­ter.

De­spite the weak re­port, the PHLX hous­ing index rose 0.4 per­cent, track­ing a broadly firmer US stock mar­ket. Shares in the na­tion’s largest home­builder, D.R. Hor­ton, gained 0.6 per­cent and Len­nar Corp ad­vanced 0.3 per­cent.

US Trea­sury debt prices rose marginally, while the dol­lar was lit­tle changed against a bas­ket of cur­ren­cies af­ter scal­ing a 14-year high.

Per­mits data up­beat

Starts fell in all four re­gions last month. October’s surge in home build­ing had widened the gap be­tween per­mits and starts. With last month’s drop in ground­break­ing ac­tiv­ity, build­ing per­mits are now lead­ing starts, which au­gurs well for the hous­ing mar­ket.

Per­mits fell 4.7 per­cent in Novem­ber to a 1.20 mil­lio­nunit rate. They have re­mained above the 1.20 mil­lion-unit level for three straight months, the long­est stretch since 2007. Sin­gle-fam­ily per­mits rose 0.5 per­cent last month to their high­est level since Novem­ber 2007. Build­ing per­mits for multi-fam­ily units, how­ever, dropped 13.0 per­cent. “The trends in the sin­gle-fam­ily data still ap­pear to be mov­ing higher over time, which is a fa­vor­able sig­nal re­gard­ing up­com­ing sin­gle-fam­ily con­struc­tion ac­tiv­ity,” said Daniel Sil­ver, an econ­o­mist at JP Mor­gan in New York.

Economists ex­pect hous­ing to con­tinue grow­ing even with mort­gage rates hav­ing jumped to their high­est in more than two years fol­low­ing the elec­tion of Don­ald Trump as the next pres­i­dent. Trump has ad­vo­cated for an ex­pan­sion­ary fis­cal pol­icy, which could fan in­fla­tion pres­sures. A sur­vey on Thurs­day showed home­builders’ con­fi­dence in De­cem­ber hit­ting its high­est level since July 2005, with builders an­tic­i­pat­ing strong sales. Since the Nov. 8 pres­i­den­tial elec­tion, the fixed 30-year mort­gage rate has in­creased about 60 ba­sis points to av­er­age 4.16 per­cent in the week end­ing Dec. 15, the high­est since October 2014, ac­cord­ing to data from mort­gage fi­nance firm Fred­die Mac.

Mort­gage rates could rise fur­ther af­ter the Fed­eral Re­serve raised its bench­mark overnight in­ter­est rate on Wed­nes­day by 25 ba­sis points to a range of 0.50 per­cent to 0.75 per­cent. The US cen­tral bank fore­cast three rate hikes in 2017. Last month, sin­gle-fam­ily home build­ing fell 4.1 per­cent to an 828,000-unit pace af­ter hit­ting a nine-year high in October. Hous­ing starts for the volatile multi-fam­ily seg­ment tum­bled 45.1 per­cent to a 262,000-unit pace. —Reuters

LON­DON: Two shop­pers stop to take a selfie in front of Sel­fridges win­dow dis­play on Ox­ford Street, one of the main shop­ping streets in cen­tral Lon­don yes­ter­day. Con­found­ing economists, Bri­tain’s econ­omy has grown solidly since the June ref­er­en­dum, house­hold spend­ing has grown faster than ex­pected, while the hous­ing mar­ket has re­mained re­silient and un­em­ploy­ment has dropped to its low­est level since 2005. — AFP

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