Permits to begin construction on new homes in the U.S. surged in October to the highest level since June 2008, mostly because of a spike in the volatile multi-unit category. The Commerce Department reported Tuesday morning that building permits, regarded as a barometer of future demand for new houses, rose 6.2 percent in October from September to a 1.034 million annualized rate.
The report beat economists expectations of an annualized pace of 930,000 units, following a rate of 974,000 in September. Meanwhile, the estimate for August was revised to an 883,000 annualized rate.
Compared to October 2012, permits were up 13.9 percent, signaling that the housing industry continues to gather steam heading towards 2014. However, Nobel Laureate Robert Shiller (of the Case/Shiller Home Price Index) said on CNBC this morning that we can’t trust the momentum of the housing market.
Authorizations to build single-family homes rose 0.8 percent to a 620,000 annual pace. Permits to construct buildings with five or more units jumped 17 percent to a 387,000 rate during October. The multi-family segment can be very volatile, but have climbed steadily in the past three months while single-family units remain steady. Permits for multi-family units were at 276,000 in August and 331,000 in September.
Looking at the report by region shows that total permits jumped 15.4 percent in the West and 9.4 percent in the South. Conversely, permits dropped by 9.6 percent in the Midwest. Permits in the Northeast were flat from September.
The report typically also includes the number of housing starts, but that data has been delayed for both September and October due to the partial government shutdown in October and funding problems. “The lapse in federal funding affected the data collection schedule for the Survey of Construction, the source of data on new housing units started and completed. Accurate data collection for September and October could not be completed in time for this release,” the Commerce Department said in Tuesday’s report.
The data on housing starts for September, October and November is now slated to be released on December 18.
Speaking of Shiller, the S&P/Case-Shiller Home Price Index for September was released Tuesday morning, showing a 0.7-percent climb in the cost of a home from August to September, marking the largest one-month move since February 2006. Compared to September last year, prices are up 13.3 percent.
Economists expected a rise of 0.9 percent for September.
Tight inventories of existing homes, an improved jobs market in the past year and fear of more rises interest rate hikes have spurred continued upward movement in home prices.
Taking a cautionary stance, David Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, said, “…data suggest a market beginning to shift to slower growth rather than one about to accelerate. Existing home sales weakened in the most recent report, home construction remains far below the boom levels of six or seven years ago and interest rates are expected to be higher a year from now."
Every city in the 20-city composite index recorded year-over-year gains, led by Las Vegas with a 29.1-percent rise. Only one city, Charlotte, posted a decline (0.2%) in prices from August to September. Detroit recorded the largest month-over-month gain at 1.5 percent.
Wall Street is puttering around even Tuesday morning as it digests the new data on the state of the housing markets and what it can mean to the Fed in making a decision on monetary stimulus. Generally speaking, the data was supportive of a strengthening market, but commentary from experts suggests a cautious approach and potential for very mild growth in the coming year.
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