Housing starts fall, but permits soar

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- Home construction fell in December, government data showed Wednesday, while the number of building permits issued in the month rose.

Construction of new homes fell to an annual rate of 557,000 during the month, down 4% from the revised November rate of 580,000, the Commerce Department said.

Economists surveyed by Briefing.com expected December housing starts to decline to an annual rate of 572,000.

But starts were up 0.2% versus the 556,000 rate in December 2008. It was the first year-over-year increase since March 2006, when starts rose 5.6%.

The decline in new home construction was led by a 6.9% drop in single-family activity, which offset gains in the multi-family sector.

"While starts registered another weak month, they remain within a range that has held for more than a year," said Adam York, an economist at Wells Fargo.

Analysts said the drop in construction activity was due in part to the weather.

Temperatures were unusually high in November and "some homes that would have been started in December were instead started in November," Patrick Newport, an economist at IHS Global Insight, wrote in a research report.

Housing starts surged nearly 9% in November.

At the same time, many builders put new projects on hold late last year amid uncertainty surrounding the government's first time homebuyer tax credit.

As a result, applications for building permits plunged in September and October, which in turn depressed housing starts in December.

"Now that the credit will benefit almost all homebuyers, not just first-timers, and will run until June 3, [builders] are preparing for increased demand," said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

Indeed, the number of building permits issued during December jumped 10.9% to a seasonally adjusted annual rate of 653,000.

It was the biggest increase since June 2008 and surprised economists who had forecast a 0.7% decline in building permits.

Given the surge in building permits during December, "starts should now be expected to rebound strongly over the next few months," Shepherdson said.

Still, many builders remain worried about the strength and sustainability of a recovery in housing with unemployment at 10% and a large number of foreclosed homes still on the market, York said.

On Tuesday, the National Association of Home Builders said its index of builder confidence declined one point to 15 in January. To top of page


Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Overnight Avg Rate Latest Change Last Week
30 yr fixed3.78%3.79%
15 yr fixed2.98%2.93%
5/1 ARM3.06%2.99%
30 yr refi3.85%3.85%
15 yr refi3.05%3.00%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Index Last Change % Change
Dow 18,080.14 21.45 0.12%
Nasdaq 5,092.09 36.02 0.71%
S&P 500 2,117.69 4.76 0.23%
Treasuries 1.92 -0.03 -1.54%
Data as of 2:42pm ET
Company Price Change % Change
Microsoft Corp 47.87 4.53 10.45%
Apple Inc 130.28 0.61 0.47%
Comcast Corp 59.64 0.41 0.69%
AT&T Inc 34.01 -0.22 -0.64%
Xerox Corp 11.99 -1.15 -8.75%
Data as of Apr 24

Sections

Shares in Italian bank Intesa Sanpaolo dropped sharply Friday after hoaxers claimed its CEO had quit after faking billions in profits. More

The impact of rising immigration on Britain's economy has become a hot topic in the election campaign. More

Stars of Youtube, Vine, Snapchat, and Twitter are attending this year's White House Correspondents' Dinner. More

A Girl Scouts Cookie Oven rolling out to Wal-Mart, Target, Kmart stores this summer will let you bake those iconic thin mints right at home. More