By Jeffry Bartash, MarketWatch
U.S. home builders broke new ground in September at the fastest pace in more than four years and permits also rose sharply in the strongest sign yet that recovery in the construction trade is becoming firmly entrenched.
Construction on new homes accelerated by 15% to an annual rate of 872,000 last month from a revised 758,000 in August, the Commerce Department said. The increase easily surpassed the 770,000 estimate of economists surveyed by MarketWatch.
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Work on new single-family homes, which account for about three-quarters of the housing market, rose 11% last month.
Construction on multi-dwelling units such as condos and townhouses climbed an even faster 25%, but that’s a category that can swing sharply from month to month and is thus less an indicator of overall housing demand.
The number of permits requested, however, underscores the likelihood that the housing market’s recovery is finally for real after a nearly six-year slump.
Building permits also shot up to a four-year high, rising 11.6% to an annual rate of 894,000. August’s permits were revised down slightly, to 801,000.
Permits for single-family homes rose 6.7% to an annualized 545,000 rate last month, while multi-dwelling permits increased 20.3% to 349,000.
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Housing party is just getting started
PNC Financial Services Group chief economist Stuart Hoffman takes a look at the housing starts and permits gains with Alisa Parenti in MarketWatch News Break.
In September, housing starts rose in all regions except the Northeast, with construction strongest in West and South. Both regions saw about a 20% jump in new construction.
Before this year the nation’s construction industry had been stuck in its worst slump in the modern era, following the collapse of a housing bubble in 2006.
Super-low interest rates, a modestly improved economy and a receding foreclosure crisis have all contributed to the upward shift in the demand for new homes.
Yet even though the pace of construction is nearly 35% higher compared to a year ago, construction activity overall remains considerably shrunken from its pre-bubble heyday. Before the bust, housing starts surpassed 2 million a year; they would probably top 1.5 million annually if the economy were fully recovered.
Going forward, home sales and construction could still be partly depressed by a slow growing U.S. economy and a high unemployment rate that limits the number of prospective buyers. The jobless rate is 7.8%.
“How far can the rebound go with unemployment where it is?” asked Steve Blitz, chief economist of ITG Investment Research. “From our perspective, not much farther.”