Surge In Home Construction Likely To Continue

Having some spec homes can help sales, especially when a buyer isn't willing to wait several months for their home to be built. Builders tend to put up more of those homes heading into the spring home-selling season that traditionally begins next month.

Larry Webb, CEO of homebuilder The New Home Co., in Aliso Viejo, Calif., says he is building homes at a faster pace than a year ago, but he sticks to a sell-first, build-second approach.

Overall, Webb is selling and building a minimum of four homes a month, at least double the pace of sales and construction two years ago.

Webb believes the stepped-up pace of home construction will continue this year. But he's holding on to the sell-first approach.

"Based on what we've gone through in the last recession and the way we do business, we think we should primarily build after we sell homes," he said. "We only build after we sell."

The company, which builds homes in California, has 10 open communities and plans to open another 14 this year.

"Normally there's a big drop off between Thanksgiving and Christmas," Webb said. "We saw very solid traffic and we're anticipating a very good first quarter."

Thursday's positive housing report, along with a steep decline in unemployment benefit applications, contributed to a strong day on Wall Street. The Standard & Poor's 500 closed at a five-year high.

"There is no denying that the housing market recovery is solidifying, and we expect construction activity to ramp up to the 1 million annualized threshold by the end of this year," said Michael Dolega, an economist with TD Economics, in a note to clients.

Dolega said the gains in home building helped boost construction hiring in December by 30,000 jobs ⿿ the most in 15 months. He predicts the construction industry could add half a million jobs in 2013.

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