U.S. housing starts in November rebounded from a seven-month low and permits surged to a five-month high, signs of strength in the housing market that could give the Federal Reserve more confidence to raise interest rates on Wednesday.
Groundbreaking jumped 10.5 percent to a seasonally adjusted annual pace of 1.17 million units, the Commerce Department said on Wednesday. October’s starts were largely unchanged at a 1.06 million-unit rate.
The strong report came as Fed officials were due to resume a two-day monetary policy meeting. The U.S. central bank is expected to raise its benchmark overnight interest rate from near zero at the end of the meeting. The first rate hike in nearly a decade is not expected to derail the housing recovery.
November marked the eighth straight month that starts remained above 1 million units, the longest stretch since 2007. Economists expect housing starts to average around 1.1 million units for 2015, which would be the highest since 2007 and up from 1.0 million units in 2014.
Robust household formation as labor market strength encourages young adults to leave their childhood homes is underpinning the housing market recovery.
But the sector remains constrained by a persistent shortage of houses available for sale. This has resulted in home prices rising faster than salaries, pushing more people towards renting.
Economists polled by Reuters had forecast housing starts rising to a 1.135 million-unit pace last month.
Single-family housing starts, the largest segment of the market, increased 7.6 percent to a 768,000-unit pace. That was the highest reading since January 2008. Groundbreaking on single-family projects rose 8.8 percent in the South, where most home building takes place.