By CHRISTOPHER S. RUGABER By CHRISTOPHER S. RUGABER ADVERTISING Associated Press WASHINGTON — Builders are putting up more new houses than they have in nearly four years, a long-awaited recovery that could help energize the U.S. economy. From areas like
By CHRISTOPHER S. RUGABER
Associated Press
WASHINGTON — Builders are putting up more new houses than they have in nearly four years, a long-awaited recovery that could help energize the U.S. economy.
From areas like Phoenix that are finally arising from the housing bust to Chicago and Minneapolis, where strong economies have lifted demand, the outlook for home building looks healthier than at any time since sales and prices collapsed in 2007.
“We’ve been hoping for this for a long time,” said Celia Chen, a housing economist at Moody’s Analytics. “It looks like things are turning.”
The improvement has been gradual. But builders are responding to interest from buyers, who are drawn by reduced prices, record-low mortgage rates and rising rents, which have made home purchases comparatively appealing. And the supply of new homes has shrunk to near-record lows.
The increased construction coincides with rising sales, prices, builder confidence and stock prices for homebuilder companies. The stocks of the 13 U.S. builders whose shares are publicly traded have increased an average 60 percent this year. By contrast, the Standard & Poor’s 500 stock index is up about 9 percent.
Last month, U.S. builders broke ground on the most homes in nearly four years. Single-family home building — the bulk of the market — rose for a fourth straight month. Permits to build single-family homes reached their highest point since March 2010.
The news helped boost stock prices Wednesday. The Dow Jones industrial average rose 87 points in afternoon trading. And homebuilders’ stocks gained. KB Home and Hovnanian Enterprises both gained nearly 1 percent.
Home construction still has a long way to go. June’s seasonally adjusted annual rate of 760,000 is the highest since October 2008. But it’s only about half of the 1.5 million annual pace that economists consider normal.
From the depth of the housing bust in April 2009, when the seasonally adjusted annual rate bottomed at 478,000 homes, the improvement has been slow but steady.
Building increased in early 2010 as the government’s tax credits for home buyers lifted sales. Beginning that summer, the pace essentially stalled until late 2011, when it began rising gradually.
A continued resurgence would benefit an economy weakened by tepid job growth and sluggish consumer spending. A healthy pace of 1.5 million new homes a year would lower the unemployment rate by about 1.5 percentage points and create 50,000 additional jobs a month, according to calculations by Joel Prakken, chairman of Macroeconomic Advisers. About half the jobs would be construction workers and contractors.
It would also add roughly 0.5 percentage point to annual economic growth, Prakken estimates.
Economists at IHS Global Insight, a consulting firm, caution that they don’t foresee starts reaching 1.5 million a year until 2015. At the current lower levels, home construction will likely have only a modest effect on the economy.
New homes represent just 20 percent of the home market. But each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to data from the home builders association.
Recoveries from recessions are typically powered by home construction, which creates jobs across many industries and drives economic growth. This recovery is different.
Construction was so depressed by the housing bust and the worst financial crisis since the Great Depression that its gains have been painfully slow. The economy has benefited only slightly.
But the pace of construction, and requests for permits, have picked up in many of the largest U.S. cities in the past year. Some of those gains reflect bounce-backs by areas devastated by the housing bust.
For example, permits for new homes jumped 85 percent in Phoenix in the 12 months that ended in May, according to an estimate by Moody’s Analytics. May is the latest month for which figures are available.
Permits are 76 percent higher in Miami than a year ago, Moody’s estimates. Nationwide, they’ve risen 27 percent.
