New U.S. home construction hit a nine-year high at an annualized, seasonally-adjusted rate of 1.323 million in October, according to a report overseen by the Commerce Department Thursday.
Perhaps more impressively, new home starts last month grew by a whooping 25.5 percent from September, the largest single-month increase since July 1982.
The news, released jointly by the Census Bureau and Department of Housing and Urban Development, showed specifically that new apartment starts increased by 75 percent, the most in five years, and single-family homes jumped by 10.7 percent.
Multi-family unit construction, which includes new apartments and townhouses, went up by 68.8 percent from September to October.
The preliminary Commerce report roundly beat economic analysts’ expectations, which ranged from 953,000–1.26 million new residential starts, according to Bloomberg.
“Home building is in a steady recovery,” said Richard Moody, chief economist at Regions Financial. “The fundamentals for demand are in good shape”.
Moody also warned, however, that “higher mortgage rates could be a potential headwind if we see further gains in rates.”
Indeed, since Donald Trump’s assumed election on Tuesday, Nov. 8, yield on the benchmark 10-year U.S. Treasury note has increased significantly from 1.88 percent to 2.29 percent as of Thursday’s market close. As a result, the average 30-year mortgage rate has also jumped in the same time period from 3.57 percent to nearly four percent.
Interests rates have risen due to expected regulatory reforms and across-the-board tax cuts that would be enacted by the new administration, thus spurring economic growth and driving up inflation.
In the short-term, however, new home buying may dip while the economy catches to higher interest rates. However, Federal Reserve Chair Janet Yellen told Congress Thursday that the U.S. central bank will move “relatively soon” on increasing the overnight federal funds rate, which will also increase dividends for Americans with savings accounts.
“Yellen’s prepared remarks followed by strong economic data for October . . . all but guarantee a December funds rate hike,” said Stuart Hoffman chief economist at PNC Financial Services Group.
The next Federal Open Market Committee meeting to discuss U.S. monetary policy is scheduled for Dec. 13.
[AP] [Bloomberg] [Wall Street Journal]