US October housing starts up 3.0 pct to 1.229 mln unit annual rate UPDATE

US October housing starts up 3.0 pct to 1.229 mln unit annual rate UPDATE

	Published : Tue, 20 Nov 2007 15:42 By : Agencies Print this Story

(updates with analyst comments)

WASHINGTON (Thomson Financial) - US homebuilders broke ground on more apartment buildings in October, but cut back significantly on single-family homes and on acquiring permits for future building projects in the face of a dismal housing market.

October housing starts unexpectedly rose 3.0 pct to a 1.229 mln unit annual rate, the Commerce Department reported today. Building permits fell 6.6 pct for the month to a 1.178 mln unit rate.

Economists were expecting a small decline in starts to 1.160 mln units after September's 11.4 pct plunge. The forecast for permits was for a small decline to 1.219 mln units.

'Building permits are the true leading indicator of residential construction activity,' said Harm Bandholz of UniCredit. 'Their renewed drop, in combination with yesterdays very weak NAHB housing market index, corroborates that the US housing recession is still far from being over.'

The overall 3.0 pct increase number masks a decline of 7.3 pct in single-family home starts to less than a million-unit rate of 884,000, the lowest level of single-family homebuilding since the last recession in October of 1991.

Construction of multi-unit buildings was up 44.4 pct in October, accounting for all of the 3.0 pct increase, but that was simply a rebound from the revised 35.9 pct drop in September.

'The unexpected rise in October housing starts is noise,' said Douglas Porter at BMO Capital Markets Economics. 'The backlog of unsold homes, the weakness in single-family activity and the persistent drop in permits suggest that the bottom has yet to be hit for US building activity.'

The pattern of starts varied considerably across US regions. In the Northeast they rose 8.5 pct overall in October with an exceptional 29.5 pct rise for single-family homes. Midwest starts 21.1 pct, also with a big 15.1 pct increase in single-family starts. Analysts had expected the unusually warm October weather to produce a spike in construction.

Nomura Securities economist David Resler said the 'unusually warm weather this October probably enabled more homes to be started than would normally be the case. Since underlying demand for those homes hasn't changed, many of these starts in October will be at the expense of activity that would normally have been spread over several months.'

In the South, where weather is less of a factor, overall starts dropped 4.6 pct and single-family starts fell 19.5 pct. Starts in the West rose 5.8 pct overall but dropped 8.1 pct for single-family homes.

Compared with October of 2006, housing starts were down 16.4 pct and permits down 24.5 pct. The single-family construction situation was even worse, with starts down 25.1 pct and permits down 31.0 pct year-over-year.

dennis.moore@thomson.com

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