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By Matt Ott

The Associated Press

SILVER SPRING, Md. 鈥� New home construction in the U.S. rebounded 11.8 percent in November as strong demand continues to boost builder confidence even with the slower winter season approaching.

The double-digit percentage increase last month left home construction at a seasonally adjusted annual rate of 1.68 million units 鈥� an 8.3 percent increase from the rate at this time last year, the Commerce Department reported last week. October鈥檚 home construction number was revised downward slightly to 1.5 million units from 1.52 million units.

Applications for building permits 鈥� a barometer of future activity 鈥� rose 3.6 percent in November to 1.71 million units. That is 0.9 percent above the rate of November 2020.

Construction of both single-family homes and apartments showed strength in November, with double-digit percentage increases from October. Despite last month鈥檚 increase, single-family housing starts are still down 0.8 percent from November 2020.

Although a big monthly jump after somewhat sideways movement suggests the housing market is still strong, economists are reluctant to put too much weight in the volatile data.

鈥淚t is best to just keep in mind that builders have more than enough work to keep them busy and interpret the ups and downs in the numbers as mostly noise and seasonal volatility,鈥� said Stephen Stanley, chief economist for Amherst Pierpont.

Regionally, the biggest jump in construction activity was in the Northeast (27.5 percent), followed by the South (18.4 percent). Building in the West rose 5.1 percent, and actually declined in the Midwest by 7.3 percent.

A monthly survey of builder sentiment released last week by the National Association of Home Builders and Wells Fargo showed sentiment improved for the fourth straight month, inching up to 84 in December from 83 last month. The index hit a record reading of 90 in November 2020.

Demand for new houses remains strong, but a labor shortage, price prediction difficulties and supply chain issues are still tripping up builders, the NAHB said. The lack of available homes for sale, new and old, has pushed prices to record levels.

Even though 2021 single-family starts are expected to finish the year 24 percent higher than the pre-COVID levels of 2019, NAHB Chief Economist Robert Dietz said, 鈥渨e expect higher interest rates in 2022 will put a damper on housing affordability.鈥�

Meanwhile the Federal Reserve announced that it will reduce its monthly bond purchases 鈥� intended to lower long-term rates 鈥� at twice the pace it had previously set. The Fed is trying to stamp out persistent inflation that has accelerated to a nearly four-decade high.

The Fed鈥檚 action may raise borrowing costs across the economy in the coming months, but policy changes don鈥檛 always immediately affect other loan rates. Even with three rate increases next year, its benchmark rate would still be historically low 鈥� below 1 percent.

The most recent S&P CoreLogic Case-Shiller 20-city home price index climbed 19.1 percent in September from a year earlier, with prices in all 20 cities setting new records.

The Commerce Department reported last month that the median price of a new home (the point where half the homes sold for more and half for less) rose to a record $407,700 in October, up nearly 18 percent from a year earlier.

The rate of home price increases in the past year has decelerated a bit recently, but with supply short and interest rates expected to rise, it鈥檚 not certain that more buyers will jump into the market.

鈥淚 don鈥檛 think the Fed鈥檚 announcement is going to result in a rush of buying that has a meaningful impact on prices,鈥� said Nancy Vanden Houten, lead U.S. economist at Oxford Economics. 鈥淟ong-term Treasury rates, which are key in determining mortgage rates, are actually lower since the Fed鈥檚 announcement.鈥�