U.S. housing starts and permits unexpectedly fell in the month of November, according to a housing market report from the Commerce Department released Tuesday. Groundbreaking fell 1.6 percent to a seasonally adjusted annual 1.028 million-unit pace, and November’s starts were revised up to a 1.045 million-unit rate.
Economists polled by Reuters had forecast starts rising to a 1.04 million-unit rate from October’s previously reported 1.01 million-unit pace.
The housing market continues to suffer as a result of tepid-to-zero wage growth in the U.S. economy, which has been far outpaced by home price increases. Even though higher mortgage rates are also a factor, they have since declined from a previous high reached in September 2013 – thanks to the Federal Reserve.
Wages are not expected to increase until mid-2015 and hopefully attract first-time buyers, particularly younger Americans, into the housing market to pick up slack for baby boomers.
Last month’s loss in groundbreaking was largely in the single-family homes segment, which unfortunately, is the largest part of the market. They fell 5.4 percent to a 677,000-unit rate, while starts for the more volatile multi-family homes segment ticked up 6.7 percent to a 351,000-unit pace, which reversed only some of October’s 9.9 percent drop.
Multi-family starts continue to be driven by demand for rental units, as Americans give up on prospects for home ownership.
Last month, permits dropped 5.2 percent to a 1.035 million-unit pace after two straight months of gains, which was the biggest drop since January. New housing permits, which typically lead housing starts by three to four months, have been above a 1 million a month pace since July.
Permits for single-family homes fell 1.2 percent to a 639,000-unit pace. Permits for multi-family housing tumbled 11.0 percent to a 396,000-unit pace. That followed two strong months of big increases.
