WASHINGTON (AP) – Home construction is making 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 cities like Chicago and Minneapolis where strong economies have lifted demand, residential construction is healthier than it’s been at any time since sales and prices collapsed five years ago.
Builders are responding to interest from buyers attracted by cut-rate prices, record-low mortgage rates and rising rents, which have made a home purchase comparatively appealing.
Last month, single-family home building rose for a fourth straight month to a two-year high. And permits to build single-family homes, which make up about 70 percent of new-home market, reached their highest point since March 2010.
Home construction still has a long way to go to fully regain its health. June’s seasonally adjusted annual rate of 760,000 is the highest since October 2008. Yet that’s only about half the pace of roughly 1.5 million homes a year that economists consider normal.
The improvement has been slow but steady from the depth of the housing bust in April 2009, when the seasonally adjusted annual rate bottomed at 478,000 homes. And a continued resurgence would deliver huge economic benefits: A healthy pace of 1.5 million new homes a year would add roughly 0.5 percentage point to annual economic growth, according to calculations by Joel Prakken, chairman of Macroeconomic Advisers.
It would also lower the unemployment rate by about 1.5 percentage points and create 50,000 additional jobs a month, half of which would be construction workers and contractors, Prakken estimates.
As demand from home buyers has risen, so has builders’ confidence. The National Association of Home Builders/Wells Fargo builder sentiment index this month reached its highest level since March 2007. The index is based on responses from 318 builders.
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