November Home Building Sets Best Pace Since April

Housing construction in November reached its highest level in seven months, the government said today in a report cited as further evidence of a robust economy.

The Commerce Department said new homes and apartments were built at a seasonally adjusted annual rate of 1.56 million units last month, up from the 1.54 million rate in October.

It was the third increase in a row and the highest level of construction activity since April. Housing starts soared 5.1% in October and rose 0.4% in September.

Housing permits, a good barometer of future housing activity, edged up 0.1% to a rate of 1.52 million units, the highest level since June, 1987. The slight gain followed a robust 8.8% increase in October.

The strength surprised analysts, who have been saying for many months that rising interest rates would dampen the housing sector. Activity this year is down from last year, but not by as much as expected.

“Home buyers are simply either ignoring or looking through all the uncertainty that surrounds interest rates . . . and saying, ‘Hey, I’ve got a job, things look pretty good, my company is growing, it’s time to buy a house,’ ” said James Christian, chief economist of the U.S. League of Savings Institutions.

He cited an unemployment rate near 14-year lows and strong sales of new homes from June through October, which pushed the backlog of unsold homes below a six-month supply for the first time in a year and a half.

“Builders are going to build them if people are going to buy them,” he said.

Nevertheless, economists say mortgage rates will probably edge higher through the middle of next year and will eventually take their toll on housing. A higher rate increases monthly mortgage payments.

Rates on fixed-rate mortgages, which fell from about 10 3/4% in mid-August to 10 1/8% in late October, have since climbed back to nearly 10 1/2%, according to the Federal Home Loan Mortgage Corp.