Nationwide production and permitting of new homes rose sharply in September to their highest levels in more than four years, according to newly released figures from HUD and the U.S. Census Bureau. A 15 percent gain brought the pace of new housing construction to a seasonally adjusted annual rate of 872,000 units, while an 11.6 percent gain brought the pace of permit issuance to 894,000 units. These were the strongest numbers seen in both categories since July of 2008.

"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 National Association of Home Builders (NAHB) and a home builder from Gainesville, Fla. "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."

"Today's strong report corresponds with the significant gains we've seen in builder confidence over the past year, and confirms our view that a housing recovery is solidly underway in a growing number of markets nationwide," added NAHB Chief Economist David Crowe. "That said, we are now almost at the half-way 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."

The overall gain in new-home construction in September was reflected across both the single- and multifamily sectors, with the first posting an 11 percent gain to a rate of 603,000 units - the best pace since August of 2008 - and the second posting a 25.1 percent gain to 269,000 units - the best pace since September of 2008.

Combined single- and multifamily starts rose in all but one region of the country in September, with a 6.7 percent gain in the Midwest, a 19.9 percent gain in the South and a 20.1 percent gain in the West. Only the Northeast posted a decline, of 5.1 percent.

Issuance of new building permits, which can be an indicator of future building activity, also registered significant gains in both the single-family and multifamily sectors in September. Single-family permits rose 6.7 percent to a seasonally adjusted annual rate of 545,000 units while multifamily permits rose 20.3 percent to 349,000 units. In both cases, these were the highest permit numbers since July 2008.

Regionally, permit issuance rose across the board in September, with the Northeast posting a 6.0 percent gain, the Midwest posting a 19.5 percent gain, the South posting a 10.5 percent gain and the West posting an 11.3 percent gain.