* Housing starts rise 0.9 percent, less than expected
* Permits fall 3.8 percent on weak multi-family sector
* Single-family permits rise to five-year high
By Lucia Mutikani
WASHINGTON, Sept 18 (Reuters) - Groundbreaking for U.S.
single-family homes rose in August and permits for future
construction hit a five-year high, pointing to resilience in the
housing market recovery in the face of higher mortgage rates.
The Commerce Department said on Wednesday single-family
starts surged 7.0 percent to an annual rate of 628,000 units
last month, the highest level in six months. Single-family homes
are by far the largest segment of the market.
Groundbreaking for the volatile apartments and condominiums
segment, however, tumbled 11.1 percent. That curbed the rise in
overall housing starts to an 891,000-unit pace, far less than
the 917,000-unit rate economists had expected.
While higher mortgage rates have slowed the pace of home
sales, demand for accommodation as the rate of new household
formation recovers from multi-decade lows is expected to keep
residential construction supported.
"Homebuilding seems to be holding up decently in the higher
mortgage rate environment, probably due to the support of strong
underlying fundamentals - thin inventories and steady household
formation," said Guy Berger, an economist at RBS in Stamford
Mortgage rates have risen in anticipation of the Federal
Reserve reducing the $85 billion in bonds it has been buying
each month to keep interest rates low.
The U.S. central bank, however, surprised markets on
Wednesday by sticking to its bond-buying program. The Fed said
tightening financial market conditions, if sustained, could slow
the pace of improvement in the economy and labor market.
Stocks on Wall Street rallied on the Fed statement, with the
Standard & Poor's 500 index hitting a record high. The
dollar dropped to a seven-month low against the euro, while U.S.
Treasury debt prices soared.
RESIDENTIAL CONSTRUCTION SLOWING
In a separate report, the Mortgage Bankers Association said
applications for loans to buy homes rose last week as mortgage
rates eased off recent highs. Since early May, rates on 30-year
mortgages have risen about 1.2 percentage points.
Still, mortgage rates remain historically low and economists
do not expect the increase to throw the housing recovery off
track. Homebuilding is expected to slow a bit this quarter from
the second quarter, but still contribute to growth this year.
Though residential building only accounts for 3.1 percent of
gross domestic product, economists estimate that for every
single-family home constructed, three jobs that last for a year
Last month, permits for single-family homes rose 3 percent
to their highest since May 2008.
A survey on Tuesday showed confidence among single-family
homebuilders held near an eight-year high in September, with
builders upbeat about prospective buyer traffic.
"We expect to see a more meaningful rebound in construction
activity in the coming months," said Millan Mulraine, senior
economist at TD Securities in New York.
Permits for multifamily homes, however, dropped 15.7 percent
last month, pushing down overall permits 3.8 percent to a
The drop in both multi-family starts and permits suggested
higher mortgage rates could be making developers a bit cautious
about taking on new projects. Builders have also been
complaining about expensive materials and a shortage of labor.
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