Dec. 20, 2011, 2:54 p.m. EST
Housing starts highest since April 2010

Multi-family upturn seen as a reflection of trend toward renting

By Ruth Mantell, MarketWatch

WASHINGTON (MarketWatch) — New construction of houses rose in November to the highest annual rate since April 2010, with multi-family activity leading the monthly U.S. growth, according to data released Tuesday by the Commerce Department.

Housing starts jumped 9.3% last month to a seasonally adjusted rate of 685,000.
“While this shows modest improvement, it is important to remember that the level of housing starts is still close to record lows and considerably below the historical pace of 1.5 million,” Bank of America Merrill Lynch analysts pointed out in a research note.

Shares of several home-building companies rose after the data Tuesday, with PulteGroup /quotes/zigman/129784/quotes/nls/phm PHM -2.38% up 10%, and both Lennar /quotes/zigman/232035/quotes/nls/len LEN -1.07% and D.R. Horton /quotes/zigman/224125/quotes/nls/dhi DHI -0.70% up 6%.
Starts for homes in buildings with at least five units rose 32.2% in November, climbing to a rate of 230,000, the highest since September 2008. Meanwhile, starts of new single-family homes increased 2.3% to an annual rate of 447,000.
Starts in October were revised down to 627,000 from a prior estimate of 628,000. Economists polled by MarketWatch had expected an annual rate of 635,000 starts for November. Read economic calendar.
Building permits, a leading indicator of housing construction, rose 5.7% in November to a seasonally adjusted annual rate of 681,000, the highest annual rate since March 2010.

Markets leap, carried by housing sector
The Dow rose more than 300 points, erasing Monday's loss. Stocks of home builders and apartment operators were boosted by a report on the housing sector. Photo: Getty Images.

Building permits for single-family homes rose 1.6% on the month to a 435,000 rate. Many economists consider single-family permits to be the most important number in the government’s release.
In the past year, overall starts are up 24.3%. However, starts of single-family homes are down 1.5% for the year. Multi-family starts have gained a record 180.5%, with the data going back to 1959.
The increasing demand for multifamily properties is due to a shift from homeownership to renting — a trend that Bank of America Merrill Lynch analysts say is likely to last for years, citing three reasons.
“First, foreclosures will naturally transition many homeowners to renters. Second, it will be challenging for current renters to become homeowners given the drop in net worth and income. Third, we expect credit conditions to remain tight for some time,” according to the analysts.
Data released on Monday indicated that home-builder confidence hit a 19-month high in December, though it remains weak.
Elsewhere Tuesday, analysts with housing-finance company Fannie Mae said U.S. economic momentum is expected to slow entering 2012, with financial-market stress from Europe’s debt problems posing the biggest risk. Additionally, the analysts expect the nation’s housing market to “remain subdued” in 2012, predicting that national fiscal problems and debate will be somewhat damaging.
“It’s important to recognize that we’re ending 2011 on a stronger note than we’ve seen throughout the year. Unfortunately, however, our 2012 outlook is not as rosy as our forecast for the fourth quarter of 2011,” said Doug Duncan, Fannie Mae’s chief economist, in a statement. “The very large fiscal impact of pending tax and legislation decisions will likely tamp down overall growth expectations for 2012.”

http://www.marketwatch.com/story/hou...dist=countdown