In contrast, construction starts fell 3.0 percent to an 861,000-unit pace, but that followed three straight months of solid gains and a three-month moving average showed a firming trend. "The trend is definitely up. Housing is going to make a small contribution to economic growth in 2012 and I would expect that home building will continue to improve through 2013," said Gus Faucher, senior economist at PNC Financial Services in Pittsburgh.
The housing market, one of the few bright spots in the economy, has regained some footing after a historic collapse that ignited the worst recession since the Great Depression. The recovery is broad-based, with sales, home building and prices all showing gains. A report on Tuesday showed builders' confidence in the market for new single-family homes reached its highest level this month since April 2006.
While last month's decline in groundbreaking prompted some economists to trim already meagre growth forecasts for the fourth quarter, homebuilding is expected to add to economic growth this year for the first time since 2005. In the 12 months through November, housing starts were up 21.6 percent, while permits had gained 26.8 percent. "More and more, the recovery is widespread. It is nice to see it happen," said Barry Rutenberg, a home builder from Gainesville, Florida, and chairman of the National Association of Home Builders.
Mortgage rates remain near record lows, helped by a program launched by the Federal Reserve in September to purchase mortgage-backed securities.A separate report from the Mortgage Bankers Association showed demand for home loans fell last week as mortgage rates ticked higher. Applications for loans to buy a home had risen in each of the prior five weeks.
Though residential construction only accounts for about 2.5 percent of gross domestic product, economists estimate that for every single-family home built at least three full-time jobs are created. Last month, permits to build single-family homes dipped 0.2 percent to a 565,000-unit pace. Permits for multi-family homes increased 10.6 percent to a 334,000-unit rate, reflecting buoyant demand for rental apartments.
The step down in residential construction last month reflected a 5.2 percent drop in the Northeast, which was slammed by Superstorm Sandy in late October. Starts also tumbled in the West, where they were down 19.2 percent. Last month, groundbreaking for single-family homes, the largest segment of the market, fell 4.1 percent to a 565,000-unit pace. Starts for multi-family homes slipped 1.0 percent to a 29,600-unit rate.