Home Starts Still Improving

New home builds neared a high not seen since 2008, according to the latest Commerce Department report. The housing market is still far from healthy, however, and the rest of the economy could be headed back into the doldrums.

New home construction in the U.S. neared a four-year high in June, continuing the upward trend of the housing market and supporting the theory that the worst is over.

Housing starts reached a 760,000 annual rate (seasonally adjusted) in June, according to a Commerce Department report, gaining 6.9 percent over the 711,000 rate in May, which was revised upward. The report puts the June rate 23.6 percent higher than the same month last year.

The June rate was the highest since October 2008, but still falls well below the healthy economic standard of 1.5 million home starts per month, according to most analysts. Building starts, a gauge of future construction, slipped 3.7 percent from the May rate of 784,000 units to 755,000 units in June, though the figure is still 23.6 percent above the June 2011 rate.

Analysts believe record-low mortgage rates and cheaper properties are encouraging builders to increase construction, especially since inventories have begun to shrink. Developed land in desirable areas is getting used up, according to many homebuilders, leading to more construction to meet demand. The shadow of more distressed homes reaching the market, however, may be keeping wary buyers away due to worries of further price contraction.