The Associated Press November 17, 2010, 7:56AM ET

Ahead of the Bell: Housing Starts

Home construction likely declined in October with expected decreases in both single-family and apartment construction.

Economists with JPMorgan Chase in New York were forecasting that housing construction dropped 5.7 percent to a seasonally adjusted annual rate of 575,000 units in October. The Commerce Department is scheduled to release the new report at 8:30 a.m. Wednesday.

In September, housing construction rose 0.3 percent to an annual rate of 610,000 units after an even bigger 10.5 percent gain in August.

With those gains, housing starts in September were up 28 percent from their bottom in April 2009. But they are still down 73 percent from their peak in January 2006 and remain 40 percent below the 1 million annual rate that analysts say is consistent with a healthy housing market.

For October, the JPMorgan economists are looking for construction to be started on 425,000 single-family homes at an annual rate, down 6 percent from September. They project that construction of apartments and other types of multifamily units will slip 5.1 percent to an annual rate of 158,000 units.

These analysts were also forecasting that applications for building permits, considered a good barometer of future activity, would rise slightly to 555,000 units, an increase of 1.5 percent from September.

High unemployment, slow job growth and tight credit have kept people from buying homes as the industry continues to suffer through a severe housing slump.

Sales of new homes hit the lowest level in more than a decade this summer after a federal homebuyer tax credit expired in April.

The National Association of Home Builders reported Tuesday that its monthly index of builders' sentiment remained in the doldrums with a reading of 16 in November, up only slightly from an October reading of 15.

Index levels below 50 are seen as reflecting a negative outlook for housing on the part of the builders. The last time the index was above 50 was in April 2006.

Many economists believe the housing industry will not see any significant improvement until next year. A huge backlog of foreclosed properties is dominating the market and providing competition for builders.


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