US housing starts soar in November

US housing starts soared in November from October to their fastest pace in five years, new evidence of the housing recovery under way, official data released Wednesday showed.

New residential construction jumped 22.7 percent to hit an annual rate of 1.091 million, the highest level since February 2008, the Commerce Department reported.

The pace of housing starts was 29.6 percent above the November 2012 rate.

Building permits, an indicator of potential future housing construction, fell 3.1 percent in November from a five-year high in October. They were up 7.9 percent from a year ago.

Both readings were more positive than analysts expected.

The report included housing starts data for September and October, which had been delayed by the October 1-16 government shutdown. Starts were at an annual rate of 889,000 in October and 873,000 in September.

"Housing starts for the three months ending in November were above our expectation and provide further evidence that the recovery in US housing should prove resilient to the rise in mortgage rates observed in recent months," said Michael Gapen of Barclays Research.

Gapen said that the housing starts data was consistent with other data on new and existing home sales, home prices, and permits, suggesting "the rise in mortgage rates in the summer caused a pause in the housing recovery, but did not change its trajectory."

The November jump in housing starts was led by new construction of single-family homes, which climbed 20.8 percent from October.

Ian Shepherdson of Pantheon Macroeconomics said that although the November starts increase was "astonishing" the underlying core trends were far less exciting.

"Starts are very erratic from month-to-month and we think a clear correction in December is a good bet. The trend in single-family permits, which are less volatile than starts and represent the core of the housing market, is only slightly upwards," Shepherdson said.

The housing data came ahead of the conclusion of the Federal Reserve's two-day monetary policy meeting. Analysts were divided over whether the Federal Open Market Committee will decide the economy is strong enough to withstand a reduction in its $85 billion a month asset-purchase program.

The FOMC policy statement will be released at 2:00 pm (1900 GMT), followed by a news conference with Fed Chairman Ben Bernanke.