Permits for future US home construction surge 6.2 per cent

Permits for future US home construction rose to their highest level in nearly 51/2 years last month, suggesting the housing market recovery remained intact despite recent signs of slowing down.

The US Commerce Department said yesterday that building permits jumped 6.2 per cent month on month in October to a seasonally adjusted annual rate of 1.03 million units. That was the highest rate since June 2008. Permits increased by 5.2 per cent in September.

Permits, which lead housing starts by at least a month, were up 13.9 per cent year on year last month.

The department postponed the release of figures on housing starts and completions for September and October until December 18 because the collection of data was affected by a 16-day shutdown of the federal government last month. November data also will be published then.

While permits are not counted in gross domestic product, they are a key indicator of economic activity and the sturdy gains in September and October should ease concerns that the housing market recovery was stalling.

Higher mortgage rates have slowed the pace of home sales, but demand for accommodation as household formation continues to recover from multi-decade lows is expected to support residential construction.

In another closely watched survey released yesterday, United States single-family home prices rose again in September, posting their strongest annualised gain in 71/2 years.

The S&P/Case Shiller composite index of 20 metropolitan areas gained 0.7 per cent in September on a non-seasonally adjusted basis, down from August's 1.3 per cent growth.

"Housing continues to emerge from the financial crisis: the proportion of homes in foreclosure is declining and consumers' balance sheets are strengthening," David Blitzer, chairman of the index committee at S&P Dow Jones Indices, said. "The longer run question is whether household formation continues to recover and if home ownership will return to the peak levels seen in 2004."

Prices in the 20 cities rose 13.3 per cent year on year in September, the strongest gain since February 2006, topping analysts' expectations for a 13 per cent rise.