Housing starts surge in positive sign for economy

Wed Oct 17, 2012 2:26pm EDT
 
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By Jason Lange

WASHINGTON (Reuters) - Groundbreaking on new homes surged in September to its fastest pace in more than four years, a sign the housing sector's budding recovery is gaining traction and supporting the wider economic recovery.

Housing starts increased 15 percent last month to a seasonally adjusted annual rate of 872,000 units, beating even the most optimistic forecasts on Wall Street, Commerce Department data showed on Wednesday.

It was the quickest pace of groundbreaking since July 2008, though data on starts is volatile and subject to substantial revisions.

America's economy has shown signs of faster growth in recent months as the jobless rate has fallen and retail sales data has pointed to stronger consumer spending.

Wednesday's data showed that housing, which was battered by the 2007-09 recession, is increasingly one of the brighter spots in the economy.

"One of the big headwinds for the economy has been the weak housing market and this indicates that headwind has dissipated," said Gary Thayer, an economic strategist at Wells Fargo Advisors in St. Louis, Missouri.

Home building could add to growth this year for the first time since 2005 and the brighter economic signal is likely to be welcomed at the White House, where a sluggish economy is weighing on President Barack Obama's chances of re-election next month.

Economists estimate that for every new house built, at least three new jobs are created.   Continued...

 
Workers prepare a new housing lot at a construction site in Alexandria, Virginia October 17, 2012. REUTERS/Kevin Lamarque