Special to The Washington Post

(Source: US Census Bureau, GMU Center for Regional Analysis)

The positive signs in the residential construction—though still modest—are important indicators of the improvement in the overall economy. The revival of the housing market is essential to sustain and expand the fragile economy recovery.

In the Washington area, residential construction began to improve earlier than in the rest of the country. The trough of residential building activity occurred in 2009. The number of building permits issued regionwide was up in 2010 over 2009, and building activity expanded even further in 2011.

Last year according to the US Census Bureau, there were about 16,000 building permits issued in the 22 counties and cities in the region. This level of planned building activity was far below the 20-year annual average of 28,600 permits, but it was a marked improvement over the 12,300 permits issued in 2009 and the 12,800 permits issued in 2010.

Building activity in the Washington region is being driven by multi-family rental construction. In 2011, nearly half of all building permits issued were for multi-family units (compared with about 25 percentover the past 20 years.) Most of these planned multi-family developments are rental projects. In addition, residential construction is the region has been concentrated in the District and closer-in suburbs. The District alone accounted for one-quarter of the building permit activity in 2011. Neighborhoods such as Columbia Heights, H Street and the Waterfront area have all been hot spots for residential construction activity over the past year.

The emphasis on multi-family rental projects is close-in areas is perhaps not surprising given the movement away from homeownership—either by choice or inability to qualify for a mortgage under stricter loan requirements. In addition, as a result of relatively strong job growth, the Washington area has attracted younger workers over the past few years, and these younger people—often single or married with no children—tend to have a preference for rental housing in more urban neighborhoods.

In 2012, the pace of single-family construction should also pick up. Inventories of existing for-sale homes are at very low levels in many neighborhoods. There is significant pent-up demand among potential first-time homebuyers. Potential move-up buyers are also becoming increasingly impatient to move. Interest rates remain at historically low levels and consumer confidence is on the rise. And despite the fact that many households are renting now, the desire for single-family homeownership has not disappeared. What likely will be different will be the types, sizes and locations of these houses. As single-family construction gets going in 2012, the trend will be towards more townhouses, smaller units and locations close to transit and employment centers.

Related: Home builder confidence rises in February

Lisa A. Sturtevant is an assistant research professor at George Mason University’s Center for Regional Analysis.