New York (written by Adam Shell/USA Today) -- Housing, long an anchor on the economy, the stock market and Main Street finances, is morphing into a more solid foundation for the economy and stock market.
Housing starts jumped 15% last month to a seasonally adjusted annual rate of 872,000, the highest in more than four years, the government said Wednesday. Building permits surged 11.6%. This follows Tuesday's report showing home builder confidence at its highest level since mid-2006.
A mix of record low rates on home loans, shrinking inventory as distressed properties get snapped up and rising consumer confidence is transforming housing into a plus, not a minus. The housing recovery bodes well for the economy, as it may spark a positive feedback loop. The more homes builders break ground on, the more construction workers that are needed. More jobs mean more Americans can afford to buy their first house, buy a new one or trade up to a bigger one. The more people who move into new houses, the more they will spend on stoves, couches, rugs, paint and TVs.
Data suggest housing will be a bigger contributor to economic activity, Citigroup economist Steven Wieting said in a report. "Groundbreaking," he said, "leads to a variety of outlays" for housing-related merchandise. The housing rebound is also leading to a breakout in housing stocks. The S&P 1500 home builder group is nearing a new 52-week high, Bespoke Investment Group says. Big 2012 winners include Pulte, up 180%, and Lennar, which has nearly doubled.