A recovery in home construction is finally building strength to help the economy for the first time in years. The home construction market registered "blowout" numbers in September, IHS Global Insight says.
Housing starts were up 15% from August, the Commerce Department reported, with increases in every region of the U.S. except the Northeast.
Housing permits, which are less volatile than starts and indicate future building, rose 11.6% and posted solid gains in all four U.S. regions.
The strong numbers, while they may not be repeated in coming months, are "good solid evidence" that the housing recovery is underway, says David Crowe, chief economist at the National Association of Home Builders (NAHB).
Housing typically leads the U.S. economy out of recession. It hasn't this time, given the depth of the crash that knocked down home prices by 30% and left behind a string of dismal years for new construction.
But in recent quarters, housing has shown improving vital signs, with rising prices and year-over-year increases in existing and new home sales. Since World War II, housing has contributed an average 4.7% annually to the growth in U.S. gross domestic product, the NAHB says. That's rebounded to more than 10% this year, Crowe says.
Home construction is closely watched because it's labor intensive. The industry lost more than 2 million jobs since the housing bubble burst. Few have come back, Crowe says. When people buy new homes, they also unleash spending for goods such as appliances and furniture -- and that generates jobs in other industries.
"Housing is now contributing to the economy," says Michael Lea, director of San Diego State University's Corky McMillin Center for Real Estate.
Last year, home builders began construction on 434,000 single-family homes, the worst year on record. This year, single-family starts will be up 21% from last year, the NAHB forecasts, and then increase 26% and 30% in the next two years.
Despite the upbeat trend of recent housing data, some housing experts warn of headwinds. Falling interest rates this year have probably pulled some demand forward, says Steven Ricchiuto, chief economist for Mizuho Securities.
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