New numbers released by the Commerce Department show that home construction surged by 15 percent in September, the fastest rate since July of 2008. This is being taken as a sign that the industry is making a much needed comeback.
The pace of construction has been slowly growing throughout 2012. Douglas Yearley, CEO of Toll Brothers Inc., told the Associated Press:
“I don’t have that crystal ball, but I will say we’re seeing the best sales we’ve seen in five years, and it sure feels good,”
Other positive details were included in the report:
Single-family homes, which made up more than two-thirds of the new construction, rose 11 percent to 603,000. That was also the quickest rate in four years. Apartment construction, which can be more volatile from month to month, rose 25.1 percent.
Applications for future building have risen greatly, a further sign that the industry believes the rebound is long-term:
Applications for building permits, a sign of future construction, jumped nearly 12 percent to an annual rate of 894,000, another high point since July 2008.
The rate of new construction has surged more than 38 percent in the past 12 months.
Housing starts are also up.
Housing starts are now 82.5 percent above the annual rate of 478,000 in April 2009, the recession low. It’s still well short of the 1.5 million annual rate that economists consider healthy. And it’s far below the more than 2 million homes started in 2007 — the peak of the boom. But the steady upward trend appears likely to endure, analysts say.
Patrick Newport, U.S. economist at IHS Global Insight, said that “there is no reason to think that this will not continue going forward.” Newport discussed the significance of the numbers and how they will affect the economy:
Newport said housing starts should climb to 950,000 next year and to 1.27 million in 2014. By 2015, he said construction should exceed 1.5 million.
Newport also predicts that housing will add about 0.25 percentage point to overall economic growth this year. If that forecast proves accurate, it would 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.
Stocks rose after the new numbers were released and the National Association of Home Builders said confidence among builders had reached a six-year high.