Raise the Roof: Housing Starts Up 15% in September

NEW YORK ( MainStreet) -- The health of the housing market rests on one key foundation: demand.

The higher the number of consumers looking for a new home, the more robust the housing market becomes and the higher property prices climb.
Rising demand for new homes and apartments fuels a surprising 15% upswing in housing starts in September.

That's why economists are breaking out the pom-poms over Wednesday's U.S. Commerce Department report announcing a 15% upswing in housing starts -- or the number of new residential construction projects -- in September.

Altogether, housing starts grew by 658,000 in September, the highest number in 17 months, the Commerce Department says. Economists polled by Bloomberg had estimated that housing starts would total 590,000 for the period, so the outperformance is welcome news for a housing market that has struggled to regain its footing.

Why the sudden boost in housing construction? Economists point to several reasons:

Increase in rentals:
A good chunk of the housing starts comes from rental units. The Commerce Department says that new buildings with five or more units totaled 227,000 for the month, a 53% rise on a month-to-month basis. The government says that rental units were at their highest levels since 2008.

Single-family homes:
While single-family homes didn't grow as much as rental units did, they did see an uptick of 1.7%, to 425,000. That's a welcome signal consumers are starting to look more closely at buying a new home.

Home builder stocks are rising:
Wall Street has some good news for the housing market, too. Stocks in that sector rose on a fairly bullish October builder's confidence survey, which recorded its best gains since the spring of 2010.

The economy is highly dependent on housing starts to fuel growth. If consumer sentiment is down, and when real estate values are sliding, there's little demand among consumers for new homes. But when housing starts begin to climb -- and September's 15% hike is a surprisingly high number -- that's a good indicator consumers are gaining more confidence in the economy.

Certainly, the housing market and economy aren't out of the woods yet. But September's housing starts number, although bolstered by high rental demand, at least shows Americans are once again thinking about spending money on new homes.

Of course, all politics is local when talking about the housing market, so check out our 3 Signs Your Housing Market Hit Bottom to make sure you know the best time to buy!

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