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Home building up 15% in September; Rise comes mainly from apartments

Home builders started projects in September at the fastest pace in 17 months, a hopeful sign for the economy.

Most of the gain was driven by a surge in volatile apartment construction. That could help create jobs and boost economic growth, but it doesn't signal a comeback for the depressed housing market.

Single-family home construction, which represents nearly 70 percent of homes built, rose only slightly. And building permits, a gauge of future construction, fell to a five-month low.

Overall, builders began work in September on a seasonally adjusted 658,000 homes, the Commerce Department said Wednesday. While that's a 15 percent increase from August, it's roughly half the 1.2 million that economists say is consistent with healthy housing markets.

"The overall result is favorable," said Pierre Ellis, an analyst at Decision Economics. "But greater optimism would have been prompted if single-family starts had increased -- suggesting that builders were seeing a better market ahead."

The spike in apartment construction helped home building increase to its best pace since April 2010, when a federalhomebuyers' tax credit temporarily boosted construction. Apartment building in September surged 53.4 percent to its highest level in three years.

Still, single-family homes rose 1.7 percent, and building permits fell 5 percent.

Increased apartment construction could be a sign that builders are gaining access to hard-to-get financing for projects, analysts said. It could also be a positive sign for the broader economy.

While home construction represents a small portion of the housing market, it has an outsized impact on the economy. Each home built creates an average of three jobs for a year and about $90,000 in taxes, according to the National Association of Home Builders.

Overall, homebuilding fell to its lowest levels in 50 years in 2009, when builders began work on just 554,000 homes. Last year was not much better.