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(Matt York)
(Matt York)

U.S. housing climbing out of its hole Add to ...

KB Home stopped building new houses in the Washington, D.C., area in 2007 as the United States fell into a historic slump.

This week, the Los Angeles-based builder said it will cautiously ramp up its work force and get back into the market, but with smaller, cheaper and greener homes.

"We retained some of our most valuable land options with an eye toward rolling out new communities when the time was right," explained Vince DePorre, KB Homes' head of regional operations. "That time is now."

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It's part of the new reality in the post-crash U.S. economy. The housing industry is slowly emerging from a deep funk, but it remains a shadow of the force it once was.

Companies are building fewer, less expensive homes, and they're employing far fewer people to do it.

Across the country, builders broke ground on homes and apartments at an annual rate of 598,000 in August, up 1.5 per cent from July to the highest level in nine months, the U.S. Commerce Department reported on Thursday. The apparent bottom of the cycle was in April, when starts reached 479,000. It's still a long way from the two-million-a-year pace of starts from 2003 to 2006, when the housing industry was a job creation juggernaut and a key engine of growth for the U.S. economy.

Builders are working on roughly a quarter of the homes that they were at the peak.

"Home building has been slowly creeping up from a deep bottom for the last eight months," said economist Celia Chen of Moody's Economy.com in West Chester, Pa. And that's a plus for an economy "struggling to escape from the recession," she said.

Instead of being a drag on overall economic growth, housing is becoming a net contributor again.

Earlier this week, U.S. Federal Reserve Board chief Ben Bernanke said the U.S. recession is probably over. But he warned that the recovery will be slow, particularly for those looking for work.

Builders are starting work on homes at a slower pace than new households are being formed - an indication that there's still a large overhang of unsold new and older homes.

Economists cautioned that the rebound in housing starts remains fragile. Part of the recent boost in starts is being driven by an $8,000 (U.S.) federal credit for first-time home buyers. That program is due to expire Dec. 1, and its imminent end is probably already slowing building activity, Ms. Chen said.

The White House is evaluating whether to extend the program.

Ms. Chen also warned of a "large pipeline" of home foreclosures that will come on the market later this year - an event that could depress demand for new homes and push prices lower.

"Residential construction is likely at bottom, [but]home building will remain very slow for the remainder of this year and below trend for the next three years," Ms. Chen said.

Meanwhile, the Fed has kept its key interest rate near zero and flushed cash into the mortgage market to keep lending rates low. The central bank, which meets next week, will eventually have to remove that stimulus, pushing up rates on home loans.

The August gain in starts was owing to an increase in multifamily units, not single-family homes, which fell by 3 per cent. Starts rose in the Midwest and the Northeast, which includes Washington, were flat in the West and fell in the South.

The nascent housing recovery, combined with the stock market rebound, is also helping to rebuild the household wealth of Americans.

Americans' net worth grew by $2-trillion to $53.1-trillion in the April-to-June quarter, the first increase in nearly two years, according to a report by the Fed. Net worth is the value of assets such as homes, checking accounts and investments minus debts like mortgages and credit cards.

But that's still 19 per cent of what it was just before the recession hit at the end of 2007.

Also Thursday, the U.S. Labour Department reported that the number of workers filing new claims for jobless benefits fell by 12,000 last week to 545,000 - the lowest level since early July.

The number of workers receiving benefits increased by 129,000 to 6.23 million in the week ended Sept. 5.

Follow on Twitter: @barriemckenna

 
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