U.S. builders started work on more homes in August, driven by the fastest pace of single-family home construction in more than two years. The increase points to steady progress in the housing recovery.
The Commerce Department said Wednesday that construction of homes and apartments rose 2.3 percent to a seasonally adjusted annual rate of 750,000 last month. That’s up from 733,000 in July, which was revised lower from last month’s initial estimate.
Single-family housing starts rose 5.5 percent to an annual rate of 535,000 homes, the best pace since April 2010. Apartment construction, which can be volatile from month to month, fell 4.9 percent.
Applications for building permits, a good sign of future construction, fell to an annual rate of 803,000. Still, that’s down from a four-year high of 811,000 in July, which was revised higher.
The rate of home construction has risen nearly 60 percent since hitting a recession low of 478,000 in April 2009. It’s still half the pace considered healthy. But the steady gains suggest the housing recovery could endure.
“Housing is clearly in a recovery mode,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. He said home construction should add about 0.3 percentage point to overall economic growth this year.
The broader economy may also benefit from recent and more sustainable gains in home prices. When that happens, Americans typically feel wealthier and spend more. Consumer spending drives 70 percent of the economic growth.
The August gains in housing starts were uneven across the country. They were led by a sharp 20.7 percent increase in new construction of homes and apartments in the Midwest. Starts also rose 3.7 percent in the South. But they fell 12.6 percent in the Northeast and 4.3 percent in the West.
Confidence among builders rose in September to the highest level in more than six years, according to a survey released Tuesday by the National Association of Home Builders/Wells Fargo. And builders are more confident that sales will improve over the next six months, the survey noted.
Sales of both new and previously occupied homes are running ahead of last year. Home prices are increasing more consistently, in part because the supply of homes has shrunk and foreclosures have eased. And mortgage rates remain near record lows, a strong enticement for potential buyers with good credit.
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