U.S. homebuilding fell more than expected in November, tumbling from a nine-year high as construction activity declined broadly, which could prompt further downward revisions to fourth-quarter economic growth estimates.
Groundbreaking on new housing projects dropped 18.7 percent to a seasonally adjusted annual rate of 1.09 million units, the Commerce Department said on Friday. Last month’s percentage decline was the largest in nearly two years.
Housing starts data is very volatile month-to-month.
There were, however, some silver linings in the report. October’s starts were revised up to a 1.34 million-unit rate, the highest since July 2007. In addition, building permits for single-family homes, the largest segment of the market, rose to a nine-year high in November.
Economists had forecast housing starts slipping to a 1.23 million-unit rate last month from October’s previously reported 1.32 million pace. Coming on the heels of data this week showing weak retail sales and industrial production in November, the plunge in groundbreaking activity could result in fourth-quarter gross domestic product forecasts being trimmed again.
The Atlanta Federal Reserve is forecasting GDP rising at a 2.4 percent annualized rate in the fourth quarter after increasing at a brisk 3.2 percent rate in the third quarter.
U.S. Treasury debt prices rose on the data, while the dollar was little changed against a basket of currencies.
Starts fell in all four regions last month. October’s surge in home building had widened the gap between permits and starts. As such, a drop in housing starts was widely anticipated to bring them more in line with permits.
The housing market remains on solid ground even as mortgage rates have jumped to more than two-year highs following the election of Donald Trump as the next president.
A survey on Thursday showed homebuilders’ confidence in December hitting its highest level since July 2005, with builders anticipating strong sales.
Trump’s surprise victory last month led to a surge in U.S. government bond yields amid investor concerns that the business mogul’s proposed expansionary fiscal policy agenda could fan inflation. Mortgage rates closely track movements in U.S. Treasury yields.
Since the Nov. 8 presidential election, the fixed 30-year mortgage rate has increased about 60 basis points to average 4.16 percent in the week ending Dec. 15, the highest since October 2014, according to data from mortgage finance firm Freddie Mac.
Last month, single-family home building, which accounts for the largest share of the residential housing market, fell 4.1 percent to an 828,000-unit pace. Single-family starts rose to a nine-year high in October.
The housing market is being supported by a tightening labor market, which is starting to drive up wages.
Housing starts for the volatile multi-family segment tumbled 45.1 percent to a 262,000-unit pace.
Permits for future construction fell 4.7 percent in November. Single-family permits rose 0.5 percent last month to their highest level since November 2007. Building permits for multi-family units dropped 13.0 percent.