US home construction expected to show small gain in October

Industrials Associated Press

The Commerce Department reports on U.S. home construction in October. The report is scheduled to be released Wednesday at 8:30 a.m. Eastern.

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CONSTRUCTION UP: The expectation is that builders broke ground on more homes in October, forecasting a rise of 1.1 percent to a seasonally adjusted annual rate of 1.03 million, according to a survey by data firm FactSet.

HOUSING STARTS: In September, housing starts rose 6.3 percent to a seasonally adjusted annual pace of 1.017 million. Much of the strength came from a rise in apartment construction.

U.S. homebuilders' confidence rebounded in November as both sales expectations and buyer traffic improved. The National Association of Home Builders/Wells Fargo index rose to 58 this month, up from 54 in October.

That puts the index just short of September's reading of 59, which was the highest level since November 2005, shortly before the housing bubble burst. Readings above 50 indicate more builders view sales conditions as good rather than poor.

Optimism is rising even during a period in which housing sales have had some trouble gaining traction.

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Price increases have cut into affordability for would-be buyers, limiting sales growth for new homes and cutting into sales for existing homes. On average last year, home prices rose at roughly six times the pace of wages, which limited the benefits of historically low mortgage rates.

Even though home price growth has moderated in recent months, prices continue to rise at more than double the annual increase in wages.

Economists believe affordability will worsen further unless there is a significant rebound in wage growth.