Giving the latest signal that the U.S. housing market is continuing to recover, the Commerce Department said this morning that construction on new homes leapt upward by 15 percent in September from August to an annual rate of 872,000, marking the highest level since July 2008. Building permits, a barometer for future construction, rose by 11.6 percent to an annual rate of 894,000, also the highest level since July 2008.
The steep climb in housing starts cruised past predictions, including the 777,000 median estimate of 81 economists surveyed by Bloomberg. The building permits figure also easily beat even the highest estimates, with economists calling for a median rate of 810,000. Construction of single-family houses, which accounts for about 75 percent of the housing market, climbed 11 percent in September from August to a 603,000 rate. Work on multi-dwelling homes, such apartment buildings, is generally more volatile, but increased 25.1 percent to an annual rate of 269,000.
Housing starts in August were revised upward to 758,000 from an original reading of 750,000. Building permits for August were revised down modestly to an 801,000 annual rate.
Over the past 12 months, construction started on 34.8 percent more homes, representing the largest year-over-year climb since April. The number of building permits for September outstripped the figure of September 2011 by a whopping 45.1 percent. That was the biggest year-over-year climb in nearly three decades.
Although the numbers are stellar compared to 2011, housing starts are still well below peaks in 2005 of 2.1 million annual starts. Taking a “glass is half full” mentality, starts are now handily above 2009 lows of 554,000. Near record low interest rates and a dwindling inventory of pre-owned and foreclosed housing is flaming demand for new buildings.
Yesterday, the National Association of Home Builders/Wells Fargo housing index – a gauge of builder’s confidence – edged upward by 1 point to 41, its highest level since June 2006 and sixth consecutive monthly gain. Although at its highest point in more than six years, readings below 50 indicate that, of the respondents, more regarding current conditions as poor than those that responded optimistically.