US home construction jumps 9.7 per cent in January

WASHINGTON – Groundbreakings on new homes jumped 9.7 per cent last month to the highest level since October 2016, welcome news for a housing market struggling with a shortage of homes for sale.

The Commerce Department said Friday that housing starts came in at an annual pace of 1.33 million in January, up from 1.21 million in December and 1.24 million in January 2017. Construction of single-family homes rose 3.7 per cent. Construction of apartments and condominiums shot up 19.7 per cent, the most since December 2016.

Home construction soared 45.5 per cent in the Northeast, rose 10.7 per cent in the West and grew 9.3 per cent in the South. But homebuilding dropped 10.2 per cent in the Midwest.

Building permits, an indicator of future construction, rose 7.4 per cent in January.

A strengthening economy has given more Americans the confidence to shop for homes. But despite last month’s uptick, builders haven’t been putting up homes fast enough to meet demand.

A shortage of houses on the market has driven up prices and blunted sales. Standard & Poor’s reported last month that U.S. home prices rose 6.2 per cent in November from a year earlier, according to its CoreLogic Case-Shiller national home price index. And sales of existing homes fell 3.6 per cent in December, though sales rose slightly for the full year 2017 from 2016, according to the National Association of Realtors.

Meanwhile, mortgage rates are creeping up. The rate on the benchmark, 30-year, fixed-rate mortgage rose to 4.38 per cent this week, the highest level since April 2014.

Still, builders are optimistic about the outlook for housing. The National Association of Home Builders/Wells Fargo builder sentiment index released Thursday read 72 for the second straight month in February, just shy of the 18-year high for optimism recorded in December.

Readings above 50 indicate more builders see sales conditions as good rather than poor. The index has been above 60 since September 2016.