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November Housing Starts Up 22.7% To Five-Year High

New Home Under Construction

Groundbreaking on new homes was 26.9% higher in November than one year earlier, and 22.7% higher than in October, the Commerce Department said on Wednesday, indicating that the housing market continues to recover.

New home starts were at an annualized 1.09 million (seasonally adjusted rate) in November. That figure includes single-family as well as multi-family residences. Single-family starts, by far the largest segment in the housing market, were up 20.8 percent in November. Housing starts are an indicator of economic health that track actual work begun on new permits.

More importantly, Wednesday’s figures beat most economist predictions: those surveyed byBloomberg ahead of the report predicted new home starts of just 952,000. Wednesday’s report was unusual in that it included three months of data (September, October, and November) which had been delayed due to the government shutdown.

“After some weakness in mid-2013 the homebuilding recovery is now back on track,” said PNC Senior Economist Gus Faucher in a statement. “Single-family homebuilding has turned around. Single-family starts fell by about three-quarters after overbuilding during the housing boom left a great deal of excess supply on the market. But low prices and record-low interest rates boosted affordability, leading buyers into the market and working off excess supply.”

Faucher predicts that starts and permits will continue to improve in 2014 as the economy recovers.