Both U.S. housing starts and building permits for future starts jumped more than 5% in November, confirming that consumers are confident enough to keep consumer spending rising, cleaning out the remaining surplus inventories in the U.S. economy.
Single-family housing returned to almost pre-September levels after a brief drop while nervous builders waited to see what consumers would do. Multi-family housing starts rose 24%, to the highest level in nearly two years. The surge in apartment and condo building is the result of both the Fed's aggressive cheap credit policy and the progressive decline in layoffs over the last two months. The number of people receiving unemployment benefits dropped by 250,000. Housing activity will remain near the current level for the next few quarters, but no further significant boost to the economy should be expected from this sector.
The National Association of Homebuilders December activity index jumped back to the pre-September level. It measures builders' confidence and model home traffic. New-home inventory is relatively low and the number of homes now under construction is at a several year high. However, the late 2001 surge in multi-family starts is likely to ebb quickly as there is no room left for further interest rate cuts.