Home Construction Climbs,
But Building Permits Decline

Home construction unexpectedly climbed in October, rising for the first time in four months, but a sign of future groundbreakings fell to the lowest level in 14 years, indicating the housing slump will continue.

Housing starts increased 3.0% to a seasonally adjusted 1.229 million annual rate, after falling 11.4% in September to 1.193 million, the Commerce Department said Tuesday. Originally, Commerce reported September starts 10.2% lower at 1.191 million.

The increase surprised Wall Street. The median forecast of 23 economists surveyed by Dow Jones Newswires was a 0.9% drop to a 1.180 million annual rate. The last time starts had gone up was June.

Year-to-year, housing starts during October were 16% below the level of construction in October 2006.

Builder sentiment remains at record lows. Bloated supplies of unsold houses are discouraging construction, and foreclosures are expected to add to those inventories. As for demand, falling home prices and banks' tightening of lending standards are restraining purchases.

A key indicator in Tuesday's data suggested an even lower level of groundbreakings in the future. Building permits decreased 6.6% to a 1.178 million annual rate in October -- the lowest level since 1.174 million in July 1993. Economists had expected permits to decline 4.0% to a rate of 1.210 million. September permits slipped 4.6% to 1.261 million.

September single-family housing starts decreased 7.3% to 884,000. Construction of housing with two or more units jumped 44.4% to 345,000; within that category, groundbreakings of homes with five or more units -- or multi-family -- were 46.5% higher.

Regionally, housing starts rose by 5.8% in the West, 21.1% in the Midwest, and 8.5% in the Northeast. Starts fell by 4.6% in the South.

Nationwide, an estimated 110,400 houses were actually started in October, based on unseasonally adjusted figures. An estimated 103,200 building permits were issued last month, also based on unadjusted figures.

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