* U.S. housing starts at 872,000-unit pace in September
* Home building likely to add to economic growth in 2012
By Jason Lange
WASHINGTON, Oct 17 Groundbreaking on new U.S.
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, b eating even
the most optimistic forecasts on Wall Street, C ommerce
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
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
Economists estimate that for every new house built, at least
three new jobs are created.
Groundbreaking on new homes rose across much of the country,
and was up 20.1 percent in western states. It fell 5.1 percent
in the Northeast, however.
Yields on U.S. government debt rose as investors bet the
data pointed to a stronger economy.
On the U.S. stock market, the PHLX Housing Index of
leading home b uilders climbed 4 percent as D.R. Horton
advanced 5 percent. Home improvement retailers Home Depot
and Lowe's were also higher.
NOT YET NORMAL
Housing remains hampered by a glut of unsold homes, and the
housing starts rate is still about 60 percent below its January
Home building now makes up just over 2 percent of the
e conomy, so it is unlikely to fuel a big acceleration in the
recovery anytime soon. The European debt crisis looms heavily
over the economic outlook, as does the possibility Washington
could hike taxes and cut spending next year.
But every little bit helps, and more home building could
partially compensate for recent weakness in factory output,
which has been hit by sluggish export demand and cooling
investment in capital goods.
"Things are lining up for housing," said John Canally, an
economist at LPL Financial in Boston. "It's another step in the
right direction, but you still have a long, long way to get back
to 'normal' in housing."
September groundbreaking for single-family homes, the
largest segment of the market, rose 11 percent to a 603,000-unit
pace - the highest level since August 2008. Starts for
multi-family homes climbed 25.1 percent.
Building permits grew 11.6 percent to a 894,000-unit pace in
September, beating economists' forecasts.
U.S. home sales have been creeping up and the steep decline
in prices since 2006 appears to have bottomed. That has helped
home-builder sentiment, which this month rose to a fresh
In a bid to help the economy by encouraging people to buy
homes, the Fed said last month it would buy $40 billion in
mortgage-backed securities every month until the jobs outlook
The Fed's efforts to lower borrowing costs have pushed
interest rates on 30-year mortgages to all-time lows. Last week,
fixed 30-year mortgage rates rose 1 basis point to average 3.57
percent, the Mortgage Bankers Association said.
Applications for U.S. home mortgages fell last week, but
demand for purchase loans, a leading indicator of home sales,
reached the highest level since June, the association said.
"It seems as though low interest rates and stable prices are
starting to stir the interest of potential buyers," said Michael
Moran, an economist at Daiwa Securities America in New York.