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U.S. NEWS

U.S. Building Permits Jump to 5-Year High

October Data Indicate Brighter Prospects for Construction Sector
By SARAH PORTLOCK
Updated Nov. 26, 2013 5:18 p.m. ET

The housing market is showing signs of stabilization as the year ends, but weaker consumer confidence and another jump in mortgage rates could spur renewed turbulence in the sector. Housing permits surged in October to the highest level in more than five years, driven largely by solid demand for multifamily buildings such as apartments and condominiums, the Commerce Department said Tuesday. And prices in most major U.S. cities rose in September, though more slowly than in prior months, according to the Standard & Poor's/Case-Shiller home-price index. "The market's clearly getting better," said Jed Kolko, chief economist at Trulia Inc., a real-estate firm. "The housing recovery has not stopped or gone into reverse." The housing sector stumbled earlier this year partly due to a spike in mortgage rates after the Federal Reserve signaled it was looking to start reining in a bond-buying program that is meant to keep a lid on long-term rates. Activity started to recover once the Fed stood pat on its bond buying throughout the summer and into the fall. Still, a 30-year fixed-rate mortgage averaged 4.22% last week, compared with 3.35% in May, according to Freddie Mac. The latest gauges showed demand firming in some areas. The number of building permits issued in October rose 6.2% from a month earlier to a seasonally adjusted annual rate of 1.034 million, the strongest pace since June 2008. Permits for multifamily units rose more than 15% in October, while single-family permits rose modestly and reversed some of their summer decline. The single-family segment is considered a steadier gauge of the underlying health of the housing market. Stronger permits can signal builder optimism. Meanwhile, home prices in 20 major U.S. cities rose a seasonally adjusted 1% in September from August

and 13.3% year-over-year, according to the S&P/Case-Shiller index. Prices for homes with governmentbacked mortgages rose a seasonally adjusted 0.3% in September from the prior month and 8.5% from a year earlier, according to a separate report from the Federal Housing Finance Agency. The Case-Shiller data showed slower growth from earlier this year, while the FHFA index suggests prices have slackened since mortgage rates started to rise over the summer. Turbulence in the housing market has weighed on Fed officials as they consider the next steps for their $85 billion-per-month bond-buying program. Stabilization in housing could comfort Fed officials ahead of their Dec. 17-18 meeting, though a decision to start slowing the bond purchases risks sparking another run-up in mortgage rates. Other threats could weigh on the housing market, including relatively modest job growth and weaker spending. Consumer confidence fell in November to its weakest reading since April, according to a report released Tuesday by the Conference Board, a business research group. Economists had expected the index would bounce back after declines in October tied to the federal government shutdown and debtceiling fight. The 16-day shutdown also delayed the housing data. The Commerce Department didn't release figures for the more closely watched housing starts because "accurate data" couldn't be collected in time. The agency will release a full residential construction report for September, October and November on Dec. 18. Write to Sarah Portlock at sarah.portlock@wsj.com
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