* Housing starts up 22.7 percent, largest rise since January
* Single-family, multi-family starts post hefty gains
* Permits fall 3.1 percent, but remain above 1 million units
* Private sector maintains sturdy growth pace in December
By Lucia Mutikani
WASHINGTON, Dec 18 U.S. housing starts surged to
their highest in nearly six years in November, a sign of
strength in the economy that underscores the Federal Reserve's
decision to start cutting back its monthly bond purchases.
The Commerce Department said on Wednesday housing starts
jumped 22.7 percent, the biggest increase since January 1990, to
a seasonally adjusted annual rate of 1.09 million units. That
was the highest level since February 2008.
Groundbreaking increased 1.8 percent in October to an
889,000 unit pace.
"The last piece of the economic puzzle is falling into place
and the expansion is assured," said Chris Rupkey chief financial
economist at Bank of Tokyo-Mitsubishi UFJ in New York.
The U.S. central bank announced at the end of a two-day
meeting on Wednesday that it would reduce its monthly $85
billion bond buying program by $10 billion starting in January.
The Fed also said it expected economic growth to pick up and
described the risks to the outlook for the economy and the labor
market as "having become more nearly balanced."
Stocks on Wall Street rallied, while U.S. Treasury debt
prices maintained their earlier losses. The dollar raced to its
highest level against the yen in more than five years.
The housing starts data was the latest indication the
economy was strengthening, with employment rising solidly in
October and November, and retail sales and industrial production
exceeding expectations last month.
Economists, who had expected starts to come in at a
950,000-unit rate in November, raised their fourth-quarter gross
domestic product estimates by as much as two tenths of a
percentage point on Wednesday to as high as a 2.3 percent
A run-up in mortgage rates, in anticipation of the U.S.
central bank tapering its monthly bond purchases, took some edge
off the housing sector's recovery earlier in the year, but not
enough to halt the process as a steady increase in household
formation from multi-decade lows props up demand.
The firmer tone appears to have spilled over into December,
with a separate report on Wednesday showing the private sector
maintained its sturdy growth pace this month, with particularly
strong gains in employment.
"The report signals fairly strong activity at the end of
2013 and looks consistent with our view that growth will pick up
next year," said Daniel Silver, an economist at JPMorgan in New
Global shipping company FedEx Corp forecast a strong
holiday season and full-year 2013 on Wednesday, even as it
reported second-quarter earnings that missed Wall Street
Last month, groundbreaking for single-family homes, the
largest segment of the market, soared 20.8 percent to a
727,000-unit pace, the highest level since March 2008.
SINGLE-FAMILY STARTS SURGE
Starts for multi-family homes jumped 26.8 percent to a
Multi-family starts have risen strongly through the course
of the housing recovery, buoyed by demand for rental apartments
as still-high unemployment and stringent lending practices by
banks priced potential homeowners out of the market.
While permits to build homes fell 3.1 percent in November to
a 1.01 million-unit pace, they were above economists'
expectations for a 990,000-unit pace. Permits lead starts by at
least a month.
The drop in permits last month is likely to be temporary.
Homebuilder confidence rose in December, with builders upbeat on
current sales conditions, future sales and prospective buyers, a
report showed on Tuesday.
"The housing pick-up is sustainable into the first half of
2014," said Jay Morelock, an economist at FTN Financial in New
York. "Builders are optimistic about pent-up consumer demand,
even in the face of rising rates and stronger prices."
The stock of houses on the market remains lean and the
inventory of homes under construction is at a 4-1/2 year low.
In November, permits were weighed down by a 10.8 percent
drop in approvals for the multifamily sector. Permits for
single-family homes rose 2.1 percent.