U.S. housing starts rose slightly more than expected in November, but a surprise drop in permits for future home construction to a 1-1/2 year low indicated continued weakness in the housing market even as the economic recovery gains traction.
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The Commerce Department said on Thursday housing starts rose 3.9% to a seasonally adjusted annual rate of 555,000 units. October's starts were revised up to a 534,000-unit pace from the previously reported 1-1/2 year low rate of 519,000 units.
Analysts polled by Reuters had expected housing starts to rise to a 550,000-unit rate.Despite last month's pick-up in residential construction, housing remains weak as a 9.8% unemployment rate weighs on demand and homeowners' ability to hang on to their properties, lagging an acceleration in broader economic activity.
A survey on Wednesday showed sentiment among home builders was mired at record low levels this month, suggesting residential construction will again be a drag on gross domestic product growth in the fourth quarter.
New building permits fell 4.0% to a 530,000-unit pace last month, the lowest since April 2009, after a 0.9% increase in October. Permits were dragged down by a 23% plunge in the volatile multi-family segment. Permits for single-family homes rose 3% last month.
Analysts had expected overall building permits to rise to a 560,000-unit pace in November.
Groundbreaking last month was lifted by a 6.9% rise in single-family home construction. Starts for the multi-family segment, however, fell 9.1%. New home completions tumbled 14.1% to a record low 513,000 units in November.