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Housing Starts Fall as Northeast Feels Effects of Sandy

Justin Horrocks | Agency Collection | Getty Images

U.S. builders broke ground on fewer houses in November after starting work in October at the fastest pace in four years. Super storm Sandy likely slowed starts in the Northeast.

The Commerce Department said Wednesday that builders began construction of homes at a seasonally adjusted annual rate of 861,000. That was 3 percent less than October's annual rate of 888,000, the fastest since July 2008.

Housing starts fell 5.2 percent in the Northeast in November compared with October. And compared with a year earlier, starts are down nearly 26 percent in the Northeast, the only region to record a drop in the past year.

Still, overall construction remains healthy. Housing starts were 21.6 percent higher last month than in November 2011. And permits rose to 899,000, the most since July 2008.

Housing starts are far above the annual rate of 478,000 touched in April 2009, the recession low. But they're still well short of the 1.5 million annual rate that is considered healthy.

Still, numerous signs suggest that the housing market is improving steadily. Builder confidence rose in December for a seventh straight month to the highest level in more than 6 years, according to a survey released Tuesday by the National Association of Home Builders/Wells Fargo.

The index of builder sentiment rose two points to 47, the highest since 2006. Builders are more optimistic, in particular, about current sales and buyer traffic, the survey found.

Readings below 50 still signal negative sentiment about the housing market. But the index has been rising since October 2011, when it was 17.

More people are looking for a new house or apartment, encouraged by modest job gains, a gradually improving economy and mortgage rates near record-low levels. At the same time, fewer homes are available for sale. The low supply is helping lift prices.

Sales of previously occupied homes rose 2.1 percent in October. New-home sales fell slightly that month, slowed by steep declines in the Northeast from super storm Sandy. But they were still 17 percent higher that month than in the same month a year ago.

Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the National Association of Home Builders.

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