Housing Report: New Construction Down 3% in November, Full Analysis


The Commerce Department on Wednesday released the November residential construction report showing an unexpected decline after two months of significant growth.

Housing has been considered a major factor in the recovery, leading to questions on its future potential to impact economic growth. November housing starts decreased by 3.0% from October. But the good news was building permits rose by 3.6% to an annualized level of 899,000 in November, above economists' estimates.

Economists look at these two facts as a continuing, “the glass is half full scenario.”

Housing industry bulls will note, starts on an annual basis have nearly doubled since 2009’s level of 478,000 units in 2009. Bulls point out year to year, single-family construction is up 21.6%. They will continue, the home construction industry has recorded eight consecutive months of increased sector confidence.

Bears, on the other hand, will counter the industry historical average since 1959 was 1.5 million new homes per year. Conservatives will add in, mortgage rates have never been lower since before the Great Depression artificially stimulating the market.

What the bulls and bears will agree on is, new and existing housing has put together a sustained increase in sales over the past eighteen months. Additionally none can deny housing prices have not only largely stabilized but showed a national October 2011 to October 2012 increase of 11.1%.

"Rising home prices have already resulted in a $760 billion growth in home equity during the past year," said NAR chief economist Lawrence Yun. "Given that each percentage point of price appreciation translates into an additional $190 billion in home equity, we could see close to a $1 trillion gain next year."

So what role will home construction and housing sales play in our recovery, the opinions are mixed largely breaking cleanly into two camps. For once the Bears and Bulls in their unique views are actually putting forth a somewhat compatible projection. Neither new housing starts or existing home sales are likely to boom yet both seem poised to continue their ongoing longer-term trends upwards.