US Home Construction Rises 15 Percent

Published by: Frank Galvano on 19th Oct 2011 | View all blogs by Frank Galvano
US Home Construction Rises 15 Percent

Construction of new homes in the US picked up to its fastest pace in 17 months in September, a rare positive sign for a housing market that has been struggling to find a foothold in recovery for more than four years.  Much of the gain occurred in the volatile multi-family sector, which helps boost economic growth, but other data suggest that a recovery in housing is still a long way off.

Construction of single-family homes, which accounts for nearly 70 percent of new home construction, was also up, by by a very small margin, while building permits, seen as an indicator in future construction activity, dropped to a five month low.  The nation's builders began construction on a seasonally adjusted 658,000 homes in September, according to a report from the Commerce Department, up 15 percent from August's pace and the fastest rate of starts since April 2010, when the market was still being propped up by a federal tax credit for homebuyers.

Even with the pickup in building, however, the pace is still just about half of the pace of 1.2 million economists say is vital for a healthy market.  Construction starts for single-family homes rose just 1.7 percent, while construction starts for multi-family projects rose 53.7 percent.  Requests for permits to begin construction, meanwhile, fell 5 percent, indicating the pickup could be short-lived.

Some economists said the fact that apartment construction is rising could be an indicator that developers are gaining access to hard-to-secure financing for projects that have set on the shelf, which could be a positive sign for the broader economy.  While new home construction only represents a small part of the overall housing market, it does make a significant impact on the broader economy.  According to estimates from the National Association of Homebuilders, every new home built creates, on average, 3 jobs for a year in addition to generating an average of $90,000 in tax revenue.

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