Builders broke ground on more homes in February as permits for new construction surged to their highest level since 2008, yet more evidence that the housing market recovery is gaining traction.
New home construction rose almost 1 percent in February over January figures to a rate nearly 30 percent above figures reported in February 2012, the Commerce Department reported Tuesday. Meanwhile, building permits climbed almost 5 percent over January numbers, and are nearly 34 percent ahead of figures reported this time last year. Strong permit data bodes well for the spring building season, and could help juice the broader economy, experts say.
"After six years of deep slumber the giant is awakening," David Lichtenstein, chairman and CEO of The Lightstone Group based in New York City, says in an email. "We are about to see a housing bull market reminiscent of most post-recession recoveries."
That enthusiasm comes on the heels of some disappointing news on the homebuilder confidence front, which showed that builders have become increasingly negative about market conditions in recent months. According to the NAHB, confidence among builders fell for the third consecutive month in March, after posting eight months of strong gains through January.
"Although many of our members are reporting increased demand for new homes in their markets, their enthusiasm is being tempered by frustrating bottlenecks in the supply chain for developed lots, along with rising costs for building materials and labor," NAHB Chairman Rick Judson, a home builder from Charlotte, N.C., noted in a release Monday. "At the same time, problems with appraisals and credit availability remain considerable obstacles to completing deals."
Despite the obstacles, the homebuilding sector added to economic growth for the first time since 2005 last year, and Tuesday's housing starts numbers add further credence to the notion that the housing market is finally gaining some ground after a historic meltdown.
Still, a Federal Reserve meeting this week is expected to address persisting doubts about the labor market outlook, a key factor in housing demand. Although the economy added almost 240,000 jobs in February, plans for the Fed to buy an additional $85 billion per month in bonds is expected to move forward until the labor market improves more significantly.