A surge in apartment construction gave home builders more work in November. And permits, a gauge of future construction, rose largely because of a jump in apartment permits.
Some analysts say the gains, though coming off extremely low levels, suggest the depressed housing industry may have reached a turning point.
Economists now say 2011 will be the first year since the Great Recession began in 2007 that home construction will have helped the economy grow. Before this year, the industry endured two of its worst years ever.
“Home building is through the worst and is now steadily improving,” said Paul Diggle, a property economist at Capital Economics.
Builders broke ground on a seasonally adjusted annual rate of 685,000 homes in November, a 9.3% jump from October, the government said Tuesday. It’s the highest level since April 2010.
Still, the rate is far below the 1.2 million homes that economists say would be built each year in a healthy housing market.
Construction of single-family homes rose 2.3% in November to a seasonally adjusted annual rate of 447,000. Apartment construction jumped 32% to a rate of 238,000 units. Single-family homes account for about 70% of home building.
For the year, work is expected to have begun on 430,000 single-family homes and 185,000 apartments. Those figures remain far below the roughly 840,000 single-family homes and 360,000 apartments that would be started in a healthy economy.
Patrick Newport and Michelle Valverde, U.S. economists at IHS Global Insight, said the better-than-expected figures show that the housing industry is “finally getting off the mat.”
“It’ll keep getting better through next year,” said Jared Franz, an associate economist at T. Rowe Price.
Last year, builders began work on roughly 587,000 homes. That barely surpassed the 554,000 homes started in 2009, the industry’s worst year ever.
Though new homes represent just 20% of the overall home market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to the National Association of Home Builders.
Renting has become a preferred option for many Americans who lost their jobs during the recession and were forced to leave their houses. The surge in apartments has provided a lift to the beleaguered housing market but has not been enough to completely offset the loss of single-family homes.
Permits rose 5.7% last month to a seasonally adjusted annual rate of 681,000, boosted by a 16% jump in permits for apartment buildings, to 246,000.
Builders typically begin construction on single-family homes six months after getting a permit. With apartment projects, the lag time can be up to a year.
Over the past year, permits for apartment buildings with five or more units have surged more than 80%. Permits for single-family homes have risen much less: just 3.6%.
Demand for new homes is weak.
By Derek Kravitz, Associated Press