The Commerce Department will release figures on new home sales for October to kick off next week. Earlier this month, the department reported that construction of single-family homes had risen 13% over the prior year. And all of that new construction is supporting both the housing market and the overall economy.

This time a year ago, housing construction was depressed.

“Mortgage rates were rising very quickly, homebuilders were very worried about the future and they pulled back very heavily on housing starts,” said Mark Fleming, chief economist at First American.

This year, he noted, mortgage rates are still up there, but homebuilders realize they have an advantage: Demand is high, but there aren’t enough existing homes on the market.

“All of that is good news for new homebuilding,” Fleming said. “‘If you build it, they will buy it,’ is generally the premise here.”

And when homebuilding picked up, the broader economy noticed.

“Residential construction was actually a drag on economic growth for the better part of the past two years, but because homebuilders started to ramp up activity, that has added to economic growth,” said Charlie Dougherty, an economist at Wells Fargo.

Building a new house generates business throughout the housing supply chain. “When you build a new home, that involves construction workers, that involves the purchasing of various materials like lumber,” Dougherty added. “And all of that represents construction activity, which is a part of overall economic activity.”

The backdrop to all of this is the Federal Reserve trying to slow down the economy to combat inflation.

One way to do that is to reduce demand for homes by making mortgages more expensive. Still, demand has stayed high despite the Fed’s rate hikes, per Susan Wachter, a professor of real estate at the Wharton School.

“The demand for new homes is a reflection of a resilient consumer,” she said. “Unemployment remains low.”

The increase in construction will likely continue, since there still aren’t enough homes to meet demand, Wachter added.

“We have a housing deficit in this country,” she said. “And despite this recent pickup, we are not making inroads into that housing deficit.”

If home construction keeps increasing, Wachter said, the economy might avoid a recession next year.