Housing starts bounced back in November following a disappointing month for construction in October. Starts were up 8.9% to an annual pace of 574,000 while building permits climbed 6% to an annual rate of 584,000, the highest level since last November. The starts figure came in close to expectations while permits were better-than-expected. The extension of government tax credits for first-time home-buyers, lower home prices, and low mortgage rates create the conditions for higher home sales and higher construction. Housing is in recovery, but the gains have been moderate as a high unemployment rate and weak labor market put downward pressure on intentions to purchase homes.
As you can see from this graph, housing starts hit a bottom in the beginning of this year, as the Fed cut interest rates to near zero and took on plans to purchase Treasuries and in an attempt to keep mortgage rates low. However starts have been bouncing along the bottom since then and until the economy shows growth and a better labor market we may be stuck in the 500K-600K range. However, with the $8,000 first-time homebuyer tax credit extended until April 30th, that may give builders reason to speed up projects over the next couple of months. When the extension of the tax credit was still in the air, starts slid sharply in the October period.