Sales of new homes also rose in 2012, although they remain near depressed levels.
Stable job gains and record-low mortgage rates have encouraged more people to buy homes. And the limited inventory of homes for sale has made builders more confident to step up construction. The number of previously occupied homes has fallen to an 11-year low.
Millions of homeowners still owe more on their mortgages than their homes are worth, making it difficult for them to sell. That's one reason the supply of homes is so tight. But higher home values are lowering the number of those "under water" and should encourage more homeowners to put their homes on the market.
More people are also moving out on their own after living with friends and relatives in the recession. That's driving a big gain in apartment construction and also pushing up rents. Higher rents are encouraging investors to buy homes and rent them.
The tighter supply of homes pushed builders in December to start work on the most homes in 4 ½ years. Last year was the best year for residential construction 2008, just after the recession started.
Home builders are also benefiting from the rebound. D.R. Horton Inc. said Tuesday that its profit in the three months ended in December more than doubled and orders jumped 39 percent.
"D.R. Horton is the best positioned it has been in its 35-year history," chief executive Donald Horton said. "We are looking forward to the spring selling season with optimism."
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