There will be more repossessions next year and tougher criteria banks are now imposing on potential borrowers.
The development of multi-family units – a category made up of apartments and townhouses – jumped 25.3 percent last month to an annual rate of 238,000, the Commerce Department said on Tuesday. That helped drive overall construction on new homes up 9.3 percent to an annual pace of 685,000, the strongest since the spring of 2010.
The better-than-expected figures were enough to cheer investors who have become accustomed to a flow of depressing news from the housing market since the bubble first burst in 2006. They also showed the degree to which the downturn is unwinding American homeownership, an objective of successive US governments since World War Two.
Ownership dropped to 66.9pc last year from a high of 70pc in 2005, and some are forecasting it will drop as low as 62pc as the hurdles to owning a home increase.
“We expect the shift from owning to renting to persist for the next few years,” said Michelle Meyer, an economist at Bank of America. She points to the prospect of further repossessions next year and the tougher criteria banks are now imposing on potential borrowers.
Thanks to the increase in activity, economists now expect residential investment to make a positive contribution to US growth this quarter for the first time since the crisis.
However, its impact is likely to be muted because the sector now accounts for less than 3pc of America’s gross domestic product. And concern over the prospects for the housing market in 2012 were echoed in Tuesday’s figures on the construction of new single-family homes.
Accounting for two-thirds of the market, they rose at a much more modest 2.3pc to an annual pace of 447,000. “Housing continues to bump along the bottom, facing a lingering overhang of supply and downard price pressure,” said Lindsey Piegza, an economist in New York at FTN Financial.
November’s annualised rate of construction on 685,000 new homes remains less than a third of the peak of 2.27m that was reached in January 2006.
Should US consumer spending slow next year, efforts to quicken a revival in the housing market are likely to come onto the political agenda. With interest rates already at a record low level, the Federal Reserve has in recent weeks signalled that Congress and The White House should consider doing more.