US housing starts rebound

US housing starts rebounded 3.0 percent in October after falling sharply in the prior month, a government survey revealed Tuesday in a rare bit of positive news for the struggling sector.

The pace of new home and apartment construction last month struck an annualized rate of 1.229 million properties, the monthly Commerce Department report said.

The rebound in home building defied the forecast of most economists who had expected housing starts to fall to 1.175 million properties.

The Commerce Department revised up its reading for housing starts in September slightly to show a rate of 1.193 million properties compared with an initial estimate of 1.191 million.

Although housing starts rebounded in October, starts have declined steadily in the past 12 months amid a widespread housing slump. Starts have fallen 16.4 percent from October of 2006 as property sales have slowed and home foreclosures have surged.

"The bounce was nice, but it does not seem to be habit-forming. The economy still faces all of its challenges and nothing in this report looks watershed, certainly not the ongoing drop in single family home starts," said Robert Brusca, an economist at FAO Economics.

Breaking down the report, construction of new free-standing homes declined 7.3 percent in October, while apartment construction showed an increase of 46.5 percent.

The housing market entered a downturn in early 2006 following a years-long boom. Big Wall Street banks have revealed multibillion dollars losses from soured mortgage investments in recent months.

The government report showed building permits, an indication of future construction activity, fell 6.6 percent to a weaker-than-expected annual pace of 1.178 million in October.

Demand for building permits has fallen sharply in the past year, dropping 24.5 percent from October a year ago.

Building permits fell to their lowest level in October since July 1993, or over 14 years, when demand was 1.174 million.

Housing starts fell in the south, but showed signs of improvement in other regions of the United States.

Economists have warned, however, that the housing market is likely to remain depressed well into 2008 in part because of the glut of unsold homes flooding the market.

Source: AFP, 11/20/07