WASHINGTON - U.S. builders started construction on homes in September at the fastest rate since July 2008 and made plans to build even more homes in the coming months. The gains show the housing recovery is strengthening and could help the economy grow.
The Commerce Department said Wednesday that home construction rose 15 percent last month to a seasonally adjusted annual rate of 872,000. Single-family construction rose 11 percent to the fastest rate in four years. Apartment building increased 25.1 percent.
Applications for building permits, a sign of future construction, jumped nearly 12 percent to an annual rate of 894,000, also the highest since July 2008.
In this Sept. 21, photo, new homes are constructed in Edmond, Okla. U.S. builders started construction on single-family homes and apartments in September at the fastest rate since July 2008, a further indication that the housing recovery is strengthening. The Commerce Department said Wednesda, that builders broke ground on homes at a seasonally adjusted annual rate of 872,000 in September. That's an increase of 15 percent from the August level.
"If there was any doubt that the housing market was undergoing a recovery, even a modest one in the face of the terrible 2008 decline, those doubts should be erased by now," said Dan Greenhaus, chief global strategist at BTIG.
The construction rate has increased by more than 38 percent over the past 12 months.
Housing starts are now 82.5 percent above the recession low rate of 478,000 hit in April 2009. That's still well short of the 1.5 million that economists consider healthy and far below the more than 2 million built in 2007 - the peak of the housing boom. But the steady upward trend suggests builders believe the housing rebound is durable.
"This is a good report," said Patrick Newport, U.S. economist at HIS Global Insight. "It is telling us that the housing market is improving and there is no reason to think that this will not continue going forward."
Record-low mortgage rates, stable price increases and a limited supply of previously occupied homes have made newly built homes more attractive to buyers. Builder confidence is at a six-year high, according to a survey released Tuesday by the National Association of Home Builders. And the Federal Reserve's aggressive policies could push long-term interest rates even lower, making home-buying affordable for the foreseeable future.
Newport said housing starts should total 750,000 for the year. He expects starts will climb to 950,000 next year and 1.27 million in 2014. By 2015, he said home construction should reach more than 1.5 million.
He also predicts that housing will add about 0.25 percent to overall economic growth this year. If that forecast proves accurate, it will be the first year that housing has been a positive factor for economic growth in five years.
"The rest of the economy is still struggling but housing is doing better because as the population grows, we need new houses to meet that demand," Newport said.
Sales of new homes were up nearly 28 percent in August compared with the same month last year. Even with the gains, sales remain near depressed levels. Economists say more jobs and better pay are needed to help accelerate sales.