By Vicki Needham - 08/19/14 10:15 AM EDT
Housing construction bounced back in July, hitting its highest level in eight months as the sector shows signs of picking up pace in the second half of the year.
After two months of drops, construction jumped 15.7 percent last month to a seasonally adjusted annual rate of 1.09 million homes, the fastest pace since the 1.11 million posted in November, the Commerce Department said Tuesday.
"A return to production levels over 1 million confirms that consumer confidence continues to improve," said Kevin Kelly, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Wilmington, Del.
"Propelled by a healthier economy, more and more people are feeling ready to buy a home."
Construction had fallen 4 percent in June and 7.4 percent in May, dropping below the benchmark level of 1 million homes.
Another positive sign for the housing market was the 8.1 percent gain in building permit applications. Permits hit 1.05 million, the highest level since April, after drops in May and June.
Single-family home construction rebounded in July, rising 8.3 percent. Meanwhile, apartment construction helped boost last month's number behind a 33 percent jump.
Regionally, housing starts rose 44 percent in the Northeast and took a huge swing for the positive in the South with a 29 percent gain after a drop in June.
Construction in the West was up 18.6 percent, while it fell sharply in the Midwest by 24.8 percent from what was considered an unusually high level in June.
Homebuilders reported on Monday that they are more confident in the market as job gains continue and buyer traffic picks up.
Meanwhile, home prices are moderating and loan rates are hovering near historic levels, another good sign for the next few months.
"July's increase in starts combined with rising builder sentiment proves that June's production dip was more of an anomaly than a reversal of the market," said David Crowe, NAHB's chief economist. "We should continue to see a gradual, consistent recovery throughout the rest of the year."