The Associated Press is reporting that the U.S. housing starts have jumped to their highest level since July 2008.
According to Commerce Department figures released on Wednesday, home construction was up 15 percent in September with a seasonally adjusted annual rate of 872,000. The construction of single family homes was up by 11 percent, the fastest pace in four years, and there was a jump of 25.1 percent in the construction of apartment buildings. Additionally, applications for new construction, a harbinger of things to come, was up almost 12 percent to an annual rate of 894,000, making it the fastest pace in the past four years as well.
Over the past 12 months, construction has increased by more than 38 percent.
Dan Greenhaus, chief global strategist at BTIG, a corporation specializing in global trading and fund services for hedge funds, mutual finds, separate accounts and family offices, said, “If there was any doubt that the housing market was undergoing a recovery, even a modest one in the face of the terrible 2008 decline, those doubts should be erased by now.”
The low hit in April of 2009, in the immediate aftermath of the economic meltdown experienced in the U.S., saw only 478,000 units under construction. While housing starts are now 82.5 percent above that rate, they are still well below the peak of more than 2 million starts in 2007. However, the upward trend has been steady, leading builders to believe that the rebound is sustainable and will continue to grow.
Several factors have fueled the comeback, including record low mortgage rates, population growth and a limited supply of previously owned homes. Aggressive action taken by the Federal Reserve to keep long term interest rates low make buying a home more affordable, fueling home purchasing activity.
Patrick Newport, U.S. economist at HIS Global Insight said, “This is a good report. It is telling us that the housing market is improving and there is no reason to think that this will not continue going forward.” He estimates that new home construction should total 750,000 units this year and expects that number to increase to 950,000 in 2013 and continue to rise, reaching 1.5 million by 2015.
Newport predicts that new housing starts will add 0.25 percent to the overall growth of the economy this year and if so, it will be the first time in 5 years that housing has been a boost to the economy.
Anika Khan, a senior economist at Wells Fargo & Co., the largest mortgage lender in the U.S. said, “This is good news for the labor market. If single family starts continue to show this positive momentum, and we expect they will, we’ll likely start to see some construction jobs come back.”
Each new home built generates an average of three jobs that last for a year and about $90,000 in tax revenues. Everything from the lumber industry to plumbing and electrical supplies stand to gain from the increase in construction.
The areas of the country hardest hit by the housing bust, the West and the South, are showing the largest gains, about 20 percent, with California leading the way. The Midwest has also experienced an upward trend of 6.7 percent, while in the Northeast starts have declined by just over 5 percent.
While the economy is still struggling, this is good news indeed. When combined with lower unemployment figures, the shrinking deficit and the doubling of the stock market since President Obama took office, it is proof positive that the policies championed by this administration, despite unprecedented opposition, are working. We are slowly but surely dragging this country out of the severe recession left to us by the Bush administration and the light at the end of the tunnel is clearly in sight.
Make sure we keep up the momentum. VOTE!