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US residential construction projects hit 5-year high in October

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US residential construction projects hit 5-year high in October

Permits for new residential construction projects soared to a five-year high in October, a sign the US housing market is gathering momentum in the fourth quarter.

Building permits authorizing the construction of privately-owned homes rose 6.2 percent in October to 1,034,000. The Commerce Department reported 974,000 permits in September, higher than the median estimate of 930,000, according to Bloomberg. This represents the highest monthly increase since June 2008. On an annualized basis, building permits increased 13.9 percent in October.

A rise in applications for multi-family housing was the biggest factor behind the gains, which points to growing demand for rental units. Total multi-family permits climbed 15.3 percent to 414,000 in October. The Commerce Department said there were 387,000 authorized projects for buildings with five or more units, compared to 620,000 for single-family units.

“The economy is getting better,” said Brian Jones of Societe Generale. “Certainly the multi-family numbers are telling you it’s time to build.”

The news comes one day after contracts for previously-owned homes fell for the fifth consecutive month, according to the National Association of Realtors. Contract signings for single-family homes fell 0.6 percent in October and at an annualized rate of 1.6 percent, suggesting the housing market is cooling amid higher mortgage rates and broader economic instability.

According to the Federal Housing Finance Agency, US house prices increased 2 percent in the third quarter, as limited inventories continue to drive up prices throughout the country. Home prices rose 0.4 percent and 0.3 percent in August and September, respectively.

“Overall, the housing market experienced another strong quarter, but price appreciation in the latter part of the quarter was relatively subdued,” said Andrew Leventis of FHFA. The August and September growth rates were “notably below appreciation rates observed earlier this year and in late 2012.”

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