WASHINGTON (AP) — Single-family home construction rose in each of the final three months of last year. The modest but steady gains helped boost confidence among builders after the worst year for single-family home construction on record.
Many economists expect the trend carried over into January. Still, the critical gauge of the housing market's health has a long way to go before most declare a full recovery is under way.
Economists expect builders broke ground on a seasonally adjusted annual rate of 675,000 homes in January, according to a FactSet survey. That would be up from 657,000 the previous month, but still half the rate that most economists consider healthy.
The Commerce Department will release the report at 8:30 a.m. Eastern time Thursday.
Single-family homes are essential to a housing rebound because they make up more than 70 percent of the market. In December, builders started those homes at a pace of 470,000 per year, helping to offset a drop in volatile apartment construction.
The rate was the fastest since April 2010, one month before a federal home-buying tax credit expired. But it's less than half the pace in which those homes went up during the 1990s. And it's only one-quarter of the 1.82 million single-family homes that builders started in January 2006, at the peak of the housing boom.
Most analysts say it could be years before the industry is fully recovered from the damage caused by the housing bust.
Builders are starting to see some signs of progress.
A measure of builder sentiment has risen for five straight months and is now at its highest level in nearly five years. Many builders are seeing more people express interest in buying a home, leading them to believe 2012 could be a turn-around year for the market. Mortgage rates have never been cheaper. And home sales started to rise at the end of last year.
Yet for all their optimism, builders began only 428,600 single-family homes last year. It was the fewest on records dating back a half-century. And home prices are still falling.
Though new homes represent just 20 percent 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.
Builders are struggling to compete with deeply discounted foreclosures and short sales — when lenders allow homes to be sold for less than what's owed on the mortgage.
After previous recessions, housing accounted for at least 15 percent of U.S. economic growth. Since the recession officially ended in June 2009, it has contributed just 4 percent.
Another reason sales have fallen is that previously occupied homes have become a better deal than new homes. The median price of a new home is about 30 percent higher than the median price for a re-sale. That's nearly twice the markup typical in a healthy housing market.
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