Residential construction rose 1.9 percent in November, after falling in October. Homebuilding last exceeded the November pace shortly before the 2008 financial crisis. Spending on single-family homes has increased 18.4 percent year over year, while spending on apartment buildings is up 36.3 percent during the same period.
Those gains are a positive sign for the overall economy. More than two-thirds of the residential construction market comes from single-family homes.Each new home creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to National Association of Home Builders. The new construction suggests that builders expect buying to continue picking up in 2014.
The construction gains might restart some of the momentum for home sales that has stalled in recent months. Increasing mortgage rates and home prices have hurt affordability. Mortgage rates are nearly a full percentage point higher than in the spring, even though they are close to historic lows.
Rates rose in May when the Federal Reserve first signaled that it might slow its $85 billion in monthly bond purchases, a move Fed officials made after made after a December meeting. The higher rates have also helped to encourage apartment construction. As homes become less affordable, more people choose to rent, increasing the demand for apartments and causing builders to begin new residential projects.
Commercial projects also increased 2.7 percent in November. Spending on offices, communication projects and transportation projects contributed to the increase. Government construction spending fell 1.8 percent after strong gains in October. Declines in expenditures on roadways, health care facilities and sewer systems led much of the decrease.