The pace of single-family home construction edged up almost 2 percent and building permits for future construction climbed nearly 6 percent. The confidence level in the industry this month is the highest in more than a year, according to the National Association of Home Builders.
As homebuilders hire more workers to pour foundations and pave roads, they are providing some long-needed juice to the economy. With new construction up 37 percent from the bottom this winter, the housing industry this quarter is expected to give a small boost to the nation's economic output for the first time in 3 1/2 years.
"It's the general trend that matters and with housing, the direction is up," wrote Joel Naroff, president of Naroff Economic Advisors.
Of course it's not all good news. New home construction is still off more than 70 percent from the peak in January 2006, and apartment construction fell 13 percent from June to July.
That pulled the combined figure for homes and apartments down 1 percent to a seasonally adjusted annual rate of 581,000 units, from an upwardly revised rate of 587,000 in June. Economists polled by Thomson Reuters expected a pace of 600,000 units.
And it's unclear that the trend will continue. July was the last month that builders can start new homes and have first-time buyers qualify for a new tax credit. Buyers can save 10 percent on the price of a home, up to $8,000 in taxes, if they complete the purchase by the end of November.
Builders and real estate agents are pressing in Congress for that credit to be extended.
If the tax credit expires, "we could see a fallback," said David Crowe, chief economist for the National Association of Home Builders.
Though the worst of the housing bust is over, builders are increasing production cautiously because the market is still flooded with deeply discounted foreclosures.
Numerous signs have emerged that the U.S. housing market has stabilized after the worst housing recession since the Great Depression, but there are several threats to any recovery.
The unemployment rate, now 9.4 percent, is expected to surpass 10 percent, leaving more homeowners unable to pay their mortgages. Interest rates are still at attractive levels but they could rise, making buying a home less affordable. Foreclosures are still at record-high levels.