Applications to build new homes reached a five-year high in October, another sign that the economy is improving as 2014 approaches.
Numbers from the United States Department of Commerce indicated that permit applications increased by 6.2% in October. There were no figures for housing starts as U.S. government data has been delayed due to the government shutdown that lasted for about half of October.
The increased housing permit numbers were driven by a big jump in multifamily housing permits. This indicates that there is a need for rental units or condominiums, according to an article from Bloomberg Businessweek.
Experts expect the housing market could continue to improve if employment continues to pick up, which would drive a demand for new homes.
“The economy is getting better,” Brian Jones, senior U.S. economist at Societe Generale in New York, told Businessweek. “Certainly the multi-family numbers are telling you it’s time to build.”
According to Businessweek, the surge in building permits is the biggest since November 2007, if an increase related to changes in the New York City building code in July 2008 is excluded. The biggest increases came in the West and the South. In the Northeast, the numbers were not changed much, while the Midwest actually saw a 9.6% decline.
Mortgage rates increased over the same period and now are at about 4.22% for a 30-year, fixed-rate mortgage. That’s down from the 4.58% rate reached in late August.
According to an article in Business Spectator, the rising mortgage costs coupled with rising home prices had stifled an improving housing market. However, the permit numbers indicate at least some builders are optimistic.
“Industry sources suggest that builders are finally beginning to stir a bit, hoping to get some new houses built in time for the spring selling season next year,” Pierpont Securities chief economist Stephen Stanley was quoted as saying in the Business Spectator.
While the permit news sounds like a positive sign for the economy, there are other indicators that are not so positive. For example, the National Association of Home Builders reported earlier that while interest in home buying is on the upswing, rising costs have held them back from buying.
Also, the National Association of Realtors said its pending-home index, a measurement of contract signings, fell to its lowest rate in almost a year. It also had fallen for the fifth straight month.
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