Housing construction hits nearly five-year high in December

The report shows that the housing market, which has been battling back for nearly seven years, is finally making a comeback. 

"Builders have become increasingly optimistic about conditions in local housing markets in recent months and this report underscores that the housing recovery is well on its way," said Barry Rutenberg, chairman of the National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. 

"With inventories of new homes at razor thin levels, builders are moving prudently to break ground on new construction ahead of the spring buying season to meet increasing demand," he said. 

Single-family housing starts rose 8.1 percent to a seasonally adjusted annual rate of 616,000, while multifamily production jumped 23.1 percent.

"Multifamily production is almost back to normal levels and while single-family starts still have a way to go, they are gaining momentum," said NAHB senior economist Robert Denk.

"This trend could be even stronger if not for persistently tight credit conditions for home buyers, flawed appraisal values and uncertainties regarding economic policy debates in Washington."

Housing starts were up across all four regions — 21.4 percent in the Northeast, 24.7 percent in the Midwest, 3.8 percent in the South and 18.7 percent in the West.

Applications for building permits, which a sign of future building activity, remained steady, up slightly to a rate of 903,000.

Regionally, permits rose 19 percent in the Northeast and 6.6 percent in the West while the South and Midwest posted respective declines of 3.4 percent and 5.7 percent.

An estimated 651,400 housing units were completed last year, 11.4 percent higher than 2011. 

While home builder confidence remained steady there are still waves of trepidation rolling through the market over the trio of weighty fiscal battles being waged in Congress — raising the $16.4 trillion debt limit, paying for scheduled spending cuts and funding the government for the remainder of the fiscal year. 

Depsite the improvement, including 30,000 construction jobs created last month, home building remains at historically low levels, according to Jed Kolko, chief economist with Trulia.

New starts in 2012 were 43 percent below the average level over the past two decades and, aside from 2009-2011, are at the lowest level since 1959, when Census Bureau began reporting housing starts.