An encouraging trend was that applications for building permits, a sign of future construction, rose to 899,000 in November, the most since July 2008.
"Growth in housing starts was extremely strong in the prior three months ... so some giveback is not a concern at this point," said Robert Kavcic, an economist at BMO Capital Markets.
Housing starts fell 5.2 percent in the Northeast from October to November. Starts in the West fell 19.2 percent. Over the past year, housing starts have declined nearly 26 percent in the Northeast, the only region to record a year-over-year drop. That suggests that Sandy slowed construction in the region.
The overall slide in construction in November was due mostly to single-family homes. Builders began work on 4.1 percent fewer single-family homes than in October. Construction of apartment buildings, which tends to fluctuate sharply, dipped 1 percent in November.
Housing starts were 21.6 percent higher last month than in November 2011. Housing starts are far above the annual rate of 478,000 touched in April 2009, the recession low. They're still well short of the roughly 1.5 million annual rate consistent with a healthy market.
But numerous signs suggest that the housing market is picking up. Builder confidence rose in December for a seventh straight month to the highest level in more than 6½ years, according to a survey released Tuesday by the National Association of Home Builders/Wells Fargo.
The index of builder sentiment rose two points to 47, the highest since 2006. Builders are more optimistic, in particular, about current sales and buyer traffic, the survey found.
Readings below 50 still signal negative sentiment about the housing market. But the index has been rising since October 2011, when it was 17.
More people are looking for a new house or apartment, encouraged by modest job gains, a gradually improving economy and mortgage rates near record-low levels. At the same time, fewer homes are available for sale. The low supply is helping lift prices.
Sales of previously occupied homes rose 2.1 percent in October. New-home sales fell slightly that month, slowed by steep declines in the Northeast from Superstorm Sandy. But they were still 17 percent higher that month than in the same month a year ago.
Sandy struck the East Coast on Oct. 29, disrupting businesses and cutting off power to 8 million homes in 10 states.
Though new homes represent less than 20 percent of the housing sales market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in tax revenue, according to data from the homebuilders association.
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