Housing starts tumble 10.6% in October
Construction activity at six-month low
Tom Stundza -- Purchasing, 11/18/2009 3:08:00 PM
The government reported that housing starts dropped 10.6% in October. Analysts said expiration of the $8,000 first-time home-buyers tax credit is the reason. There was also a drop in multi-family permits. They fell 34.6%. CNNMoney.com says this is "a big and unexpected drop for the struggling homebuilding industry."
Homebuilders began construction at an annual rate of 529,000 new homes during the month, 10.6% below the revised September rate of 592,000 and 30.7% below the 763,000 rate during October 2008. It was the lowest level of housing starts since April, when the annual rate was 479,000.
Mark Vitner, senior economist at Wells Fargo Securities, says "builders appear to have pulled back on starts of new single-family homes in October as they awaited news about whether the first-time home-buyers tax credit would be extended. " Outside of the earlier bump in demand due to the tax-credit, demand for new homes remains exceptionally weak.
Vitner also says that "scores of vacant town homes, condominiums and apartments have pushed up vacancy rates and cut rents, making new multi-family projects much less viable." The good news, he suggests, is that "completions continue to decline, which will ultimately help bring the housing market back into balance."
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