From areas like Phoenix that are finally arising from the housing bust to cities like Chicago and Minneapolis where strong economies have lifted demand, residential construction is healthier than it's been than at any time since sales and prices collapsed five years ago.
Builders are responding to interest from buyers attracted by cut-rate prices, record-low mortgage rates and rising rents, which have made a home purchase comparatively appealing.
Last month, single-family home building rose for a fourth straight month to a two-year high. And permits to build single-family homes, which make up about 70 percent of new-home market, reached their highest point since March 2010.
The news helped lift stock prices. The Dow Jones industrial average rose 69 points in the first 90 minutes of trading, overcoming an early deficit of 50 points. And homebuilders' stocks gained. KB Home and Hovnanian Enterprises both rose nearly 1 percent.
Home construction still has a long way to go to fully regain its health. June's seasonally adjusted annual rate of 760,000 is the highest since October 2008. Yet that's only about half the pace of roughly 1.5 million homes a year that economists consider normal.
The improvement has been slow but steady from the depth of the housing bust in April 2009, when the seasonally adjusted annual rate bottomed at 478,000 homes. And a continued resurgence would deliver huge economic benefits: A healthy pace of 1.5 million new homes a year would add roughly 0.5 percentage point to annual economic growth, according to calculations by Joel Prakken, chairman of Macroeconomic Advisers.
It would also lower the unemployment rate by about 1.5 percentage points and create 50,000 additional jobs a month, half of which would be construction workers and contractors, Prakken estimates.
As demand from home buyers has risen, so has builders' confidence. The National Association of Home Builders/Wells Fargo builder sentiment index this month reached its highest level since March 2007. The index is based on responses from 318 builders.
The builders' outlook for sales in the next six months also brightened. They reported higher turnouts by prospective buyers.
In its report Wednesday on home construction, the Commerce Department noted that the gains in single-family home construction was broad-based: It rose in every U.S. region, led by the West.
"This was a good report," said Martin Schwerdtfeger, an economist at TD Bank. He said the growth in construction permits "suggests that the momentum in building activity observed in recent months should carry forward."
The housing market is showing gains even while the rest of the economy has weakened. Federal Reserve Chairman Ben Bernanke highlighted the improvement in an otherwise gloomy report to Congress on this week. Many economists believe that housing construction could contribute to overall economic growth this year for the first time since 2005.
New-home sales rose in May to the fastest pace in more than two years. And while sales of previously occupied homes dipped in May, they were nearly 10 percent higher than a year earlier.
More home building also pushed up construction spending in May by the largest amount in five months.
Many people still have difficulty qualifying for home loans or can't afford larger down payments required by banks. That's holding back home sales.
The economy is growing only modestly and job creation has slowed sharply in the past three months. U.S. employers added an average of 75,000 jobs in that time, down from a pace of 226,000 in the first three months of the year.
Though new homes represent just 20 percent of the overall home market, they have an outsize impact on the economy. Each home built creates an average of three jobs for a year and generates about $90,000 in taxes, according to data from the home builders association.