Economy

Housing Starts Decline 10.6%


New housing starts dropped 10.6% in October compared with September, to a seasonally adjusted rate of 529,000, the Commerce Dept.reported on Nov. 18. The number, which was lower than analyst estimates, is a seven-month low. October housing starts were down 30.7% year-over-year. Single-family housing starts were off 6.8% in October, to an annual rate of 476,000. The October rate for units in buildings with five units or more was 48,000, down one-third from the previous month and off 78.1% year-over-year. October building permits were at a seasonally adjusted annual rate of 552,000, 4% below September and down 24.3% year-over-year. The numbers reflect builder uncertainty about the fate of the first-time homebuyer tax credit, which had buoyed the housing market and was due to expire at the end of November. In early November, Congress expanded and extended the tax credit on a new home into the first half of 2010. Prior to the tax-credit extension, builders and home buyers were in a "holding pattern," the National Association of Home Builders said in a Nov.17 survey of builder confidence. The group said it hopes the expanded credit will improve sales. Paul Ashworth, Senior U.S. Economist for Capital Economics, cautioned that housing starts are extremely volatile month-to-month and the decline may not be significant. "Nevertheless, taken at face value it suggests homebuilders are still uncertain about the sustainability of the rebound in home sales." Action Economics said the "October weakness is likely at least partly due to wet conditions across the country, though the starts figures have posted an anemic recovery that has persistently undershot improvement in the new construction figures from the monthly construction spending report, as well as other real estate gauges." October housing starts had been expected to rise to a 600,000 annual rate, according to a median forecast of 77 economists surveyed by Bloomberg news.
Mintz is news editor for BusinessWeek.com in New York.

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