US single-family housing starts surge, permits up slightly

WASHINGTON: US single-family homebuilding rebounded in November as the drag from hurricanes faded, but the threat of tariffs on imported goods and potential labour shortages from mass deportations of immigrants could hamper new construction next year.

The report from the Commerce Department on Wednesday showed only a slight increase last month in permits for the future construction of single-family homes, suggesting that residential investment will probably remain a drag on economic growth in the fourth quarter.

Higher mortgage rates even as the Federal Reserve has been lowering borrowing costs remain a constraint for the housing market, with promised tariffs and expulsions of undocumented immigrants by President-elect Donald Trump seen worsening the situation.

The US central bank is expected to deliver a third consecutive rate cut on Wednesday, but project fewer reductions in borrowing costs than the four it had forecast in September on continued economic resilience and concerns that some of the incoming Trump administration’s policies would be inflationary.

“We are less upbeat about the outlook, as we expect Donald Trump’s proposed trade and immigration policies to weigh on homebuilders’ supply capacity,” said Bradley Saunders, North America economist at Capital Economics.

Single-family housing starts, which account for the bulk of homebuilding, jumped 6.4 per cent to a seasonally adjusted annual rate of 1.011 million units last month, the Commerce Department’s Census Bureau said.

Homebuilding has struggled for much of this year after benefiting from a severe shortage of previously owned homes for sale. Though the Fed started cutting interest rates in September, the average rate on the popular 30-year fixed-rate mortgage remains near 7.0 per cent, tracking 10-year US Treasury yields, which have risen on the economy’s resilience and worries that the Trump administration’s policies will stoke inflation.

A National Association of Home Builders survey on Tuesday showed a measure of sales expectations in the next six months surged in December to the highest level since April 2022. Homebuilder sentiment was steady at seven-month highs amid hopes for fewer regulations from Trump’s Republican administration.

TARIFFS HIT FEARED

But economists were less enthusiastic, warning of even higher lumber prices and severe worker shortages if Trump followed through with tariffs and expulsions of undocumented immigrants, which would undermine the housing market.

The US imports large quantities of lumber from Canada. Trump has said he would impose a 25 per cent tariff on all imports from Canada and Mexico.

“We don’t think any regulatory relief for homebuilders would happen immediately,” said Nancy Vanden Houten, lead US economist at Oxford Economics. “Many of the regulations on residential building are imposed at the state and local level. Foreign-born workers who are not citizens comprise about 18 per cent of the construction workforce.”

Ground-breaking on single-family housing projects rebounded 18.3 per cent in the densely populated South after being depressed by Hurricanes Helene and Milton in October. Single-family housing starts, however, declined in the Northeast, Midwest and the West.

Single-family homebuilding fell 10.2 per cent from a year ago.Starts for multi-family housing plunged 24.1 per cent to a pace of 264,000 units, the lowest level since March. Overall housing starts dropped 1.8 per cent to a rate of 1.289 million units. Economists polled by Reuters had forecast housing starts would increase to a rate of 1.343 million units. Starts dropped 14.6 per cent from a year ago.

Permits for future construction of single-family housing rose 0.1 per cent to a rate of 972,000 units in November. Single-family housing permits increased 1.8 per cent in the South. They declined in the Northeast and West, but were unchanged in the Midwest.

Multi-family building permits soared 22.1 per cent to a rate of 481,000 units. Building permits as a whole jumped 6.1 per cent to a rate of 1.505 million units. They slipped 0.2 per cent from a year ago.

The number of houses approved for construction that were yet to be started increased 6.1 per cent to 295,000 units last month.The single-family homebuilding backlog rose 0.7 per cent to 144,000 units. The completions rate for that housing segment increased 3.3 per cent to 1.038 million units.

Overall housing completions fell 1.9 per cent to a rate of 1.601 million units. The number of housing units under construction dropped 1.8 per cent to a rate of 1.434 million units.The inventory of single-family housing under construction decreased 0.8 per cent to a rate of 637,000 units, the lowest level since March 2021.