Housing Construction Posts Unexpected Rebound In October
Tuesday, November 20th 2007, 8:04 am
By: News On 6
WASHINGTON (AP) _ Construction of new homes and apartments rebounded in October by the largest amount in eight months but the unexpected increase was not viewed as a signal of a housing turnaround.
The Commerce Department reported Tuesday that housing construction rose by 3 % in October, the first increase after three months of declines and the biggest advance since a 6 % rise last February.
However, all of the strength came in the volatile apartment sector, which jumped by 44.4 %. Construction of single-family homes fell for a seventh straight month, declining by 7.3 % in October compared to September.
Analysts believe that housing is likely to remain weak through much of 2008 as builders struggle with historically high levels of unsold homes and rising mortgage defaults which are dumping even more homes back on glutted markets.
The overall increase left construction in October at a seasonally adjusted annual rate of 1.229 million units, down 16.4 % from activity a year ago.
Applications for building permits, seen as a good sign of future activity, fell for the fifth straight month in October, dropping by 6.6 % to an annual rate of 1.178 million units. That is down a sharp 24.5 % from a year ago.
The rebound in overall construction came as a surprise to analysts who had forecast a drop of 1.3 %. However, the 6.6 % slide in permit applications was more severe than the 4.8 % fall expected by Wall Street.
Troubles in housing are expected to seriously depress overall economic growth in the current quarter and early next year with some analysts growing more concerned about an outright recession.
The Federal Reserve has cut interest rates twice since September in order to insulate the economy from troubles in housing and credit markets. However, Federal Reserve Chairman Ben Bernanke and other Fed officials have signaled that they are not likely to cut interest rates further unless the economic weakness deepens significantly because of worries that a surge in oil prices will make inflation worse.
The rebound in construction in October reflected gains in all regions of the country except the South, where building activity fell by 4.6 %. Construction rose by 21.1 % in the Midwest, 8.5 % in the Northeast and 5.8 % in the West.