The housing sector appears to be picking up some steam as new construction hit an 18 month high in November.
Housing starts and permits for future construction jumped to a 1-1/2 year high in November as demand for rental apartments rose, suggesting the housing market was starting to recover.
The Commerce Department said on Tuesday housing starts surged 9.3 percent to a seasonally adjusted annual rate of 685,000 units, the highest since April last year.
Economists polled by Reuters had forecast housing starts rising to a 635,000-unit rate. Compared to November last year, residential construction was up 24.3 percent.
"It is positive for the housing market, which is picking up from rather subdued levels. Demand is coming off the lows, so that is healthy," said Sean Incremona, an economist at 4CAST in New York.
U.S. Treasury debt prices briefly extended losses on the data, while the dollar fell against the euro. U.S. stock index futures held their gains.
Although the overall housing market remains weak, rising demand for rental apartments is boosting the construction of multifamily homes.
Falling house values and stringent lending practices by banks are pushing Americans away from homeownership.
Hopefully, construction of new apartments will take the pressure off that market as well. Rents have increased 12% in the last two years as underwater homeowners look to rent after abandoning their homes.
But things are still far from rosy:
But a full recovery for the sector, which was one of the main triggers of the 2007-09 recession, remains far off in the future given a glut of unsold homes, weak prices, high unemployment and tight credit.
Housing starts are still less than a third of their 2.273 million rate peak in January 2006.
And that glut will also keep existing home prices depressed for years to come.