Home starts jump to four-year high as demand firms

Housing starts in the U.S. surged 15 percent in September to the highest level in four years, adding to signs of a revival in the industry at the heart of the financial crisis.
Beginning home construction jumped last month to an 872,000 annual rate, the fastest since July 2008 and exceeding all forecasts in a Bloomberg survey of economists, Commerce Department figures showed last week in Washington. An increase in building permits may mean the gains will be sustained.
“It’s no longer a question of whether the industry is rebounding,” Larry Sorsby, chief financial officer of Red Bank, N.J.-based Hovnanian Enterprises Inc., the best-performing home-building stock this year, said in a telephone interview. “There is clear evidence that we have bounced off the bottom and are in the midst of a recovery.”
Sales gains stoked by record-low mortgage rates, dwindling supply and population growth indicate construction by builders like Meritage Homes Corp. and Lennar Corp. can continue strengthening and contribute to economic growth. Improving demand may also help revive a part of the job market that’s seen construction employment fall by almost 2 million since the end of 2007.
The jump in U.S. housing starts is the latest sign that the world’s largest economy is gaining strength after growth slowed to a 1.3 percent annual pace in the third quarter. Gains in retail sales and industrial production in September both exceeded economists’ forecasts.
The median housing starts projection in the Bloomberg survey called for a 770,000 pace, and estimates ranged from 735,000 to 800,000. The prior month was revised up to 758,000 from a previously reported 750,000 pace. Over the past 12 months, work began on 34.8 percent more homes, the biggest year-over-year gain since April.
Building permits, a proxy for future construction, jumped to an 894,000 annual rate, also exceeding the median forecast and the fastest since July 2008, the Commerce Department’s figures showed. They were projected to rise to 810,000, with a range of 780,000 to 850,000.
The number of permits swelled by 45.1 percent since September 2011, the largest annual jump since 1983.
Construction of single-family houses climbed 11 percent from August to a 603,000 rate. Work on multifamily homes, such as apartment buildings, increased 25.1 percent to an annual rate of 269,000.
The West showed the biggest gain in housing starts last month, with a 20.1 percent jump. The South and Midwest also showed increases, while the Northeast had a decline.
Demand for apartments nationwide is the strongest in a generation because of home foreclosures, stiffer lending standards and a growing number of young adults forming households.
A harbinger of progress for homebuilders, demand for new homes has hovered at a two-year high. Homes sold at a 373,000 annual pace in August and at a 374,000 rate in July, the best two months since the March-April 2010, according to Commerce Department figures.
“Housing is once more showing signs of life,” John Williams, president of the Federal Reserve Bank of San Francisco, said in a speech this week. “The housing recovery includes a rebound in home construction, something particularly important for the health of the overall economy.” •

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