Housing construction hits 4-year high

"That said, we are now almost at the halfway mark in terms of what would be considered a normal amount of new-home construction in a healthy economy, and we need to see consistent improvement like this over an extended period to get back to where the market should be in terms of generating jobs and economic growth."

A normal level runs around 1.5 million annually. 

Applications for building permits, which provide a glimpse into the direction of future construction, also hit a four-year high, up 11.6 percent to an annual rate of 894,000.

Single-family permits rose 6.7 percent to a seasonally adjusted annual rate of 545,000 units while multifamily permits were up 20.3 percent to 349,000, the highest level since July 2008.

Permits were up in all four regions —  up 6 percent in the Northeast, 9.5 percent n the Midwest, 10.5 percent in the South and 11.3 percent in the West.

A separate report released Tuesday by the NAHB showed builder confidence at a six-year high, although it is still running below the level considered healthy. 

Across the nation, construction increased in three of four regions, with the best showing in the West (20.1) and the South (19.9). 

Starts were up 6.7 percent in the Midwest and dropped by 5.1 percent in the Northeast.

"Builders are responding to the rising demand for new homes as consumers begin to feel more confident about their local markets and put back into motion purchasing plans that were on hold during the recession," said Barry Rutenberg, chairman of the NAHB. 

"Yet, while September's surge in activity is certainly encouraging, we need to remember that we still have a long way to go back to a fully functioning market — and in order to get there, significant challenges must still be addressed in terms of credit availability and appraisal issues, as well as the increasing cost of building homes due to rising materials prices and a declining inventory of buildable lots."

This story was updated at 12:15 p.m.