Finding an Apartment to Rent Is Hard. Here Come the Builders. – Barron’s

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Building permits for residential construction surged in October from a year earlier to the highest level since May 2007, suggesting the housing pipeline is heating up even as winter sets in.

Permits leapt 14.1% from a year earlier to a seasonally adjusted 1.46 million, the Commerce Department said Tuesday. That figure was better than the 1.385 million Bloomberg consensus estimate. Housing starts also rose in October, up 8.5% from a year earlier to 1.314 million. That was a bit shy of the 1.320 million economists expected. Both single- and multi-family starts rose.

While the indicators tend to be a volatile ones, permits were boosted by a jump in the multi-family sector, where the 12-month average climbed to a 32-year high, notes Ian Shepherdson, chief economist at Pantheon Macroeconomics. This, he said, is likely in response to rock-bottom vacancy rates on rental properties.

Given the lag between securing a building permit and completing construction, the vacancy rate will remain under pressure for at least another year, Shepherdson said.

It might be no surprise, then, that shares of real-estate investment trusts have posted big gains over the past 12 months. Leading the pack is Sun Communities (ticker: SUI), up 58%. Sun owns manufactured housing-communities.

A few REITs, though, have pared gains this month. Essex Property Trust (ESS), for example, has fallen 3.1% since the start of November, paring its 12-month gain to 24%. The company owns apartments on the West Coast, where the rise in October building permits was particularly strong.

Write to Lisa Beilfuss at lisa.beilfuss@wsj.com

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Finding an Apartment to Rent Is Hard. Here Come the Builders. - Barron's