Real Estate

US housing starts, permits fall; trend points to recovery

New homes under construction in California.
George Rose | Getty Images

U.S. housing starts and permits fell in November, but the underlying trend remained consistent with an improving housing market.

Groundbreaking declined 1.6 percent to a seasonally adjusted annual 1.028 million-unit pace, the Commerce Department said on Tuesday. November's starts were revised up to a 1.045 million-unit rate.

Economists polled by Reuters had forecast starts rising to a 1.04 million-unit rate from October's previously reported 1.01 million-unit pace.

Read MoreFedon track to raise rates this summer: Survey

Housing continues to be stymied by tepid wage growth, which has been far outpaced by home price increases. Higher mortgage rates are also a constraint, although they have since declined from a peak reached in September 2013.

But with job growth accelerating, wages are expected to pick up next year and pull first-time buyers, especially young Americans, into the housing market, providing a tailwind for the economy.

Last month's drop in groundbreaking was concentrated in the single-family homes segment, the largest part of the market, which fell 5.4 percent to a 677,000-unit rate. Single-family starts had posted two straight months of hefty gains.

Starts for the volatile multi-family homes segment increased 6.7 percent to a 351,000-unit pace. The increase unwound some of October's 9.9 percent drop.

Multi-family starts continue to be driven by demand for rental units as many financially-strapped Americans shun home ownership.

Last month, permits dropped 5.2 percent to a 1.035 million-unit pace after two straight months of gains. That was the biggest drop since January.

Permits, which lead starts by three to four months, have been above the 1 million pace threshold since July.

Permits for single-family homes fell 1.2 percent to a 639,000-unit pace. Permits for multi-family housing tumbled 11.0 percent to a 396,000-unit pace. That followed two strong months of big increases.