U.S. housing starts fall 10.6% over tax credit uncertainty

November 19, 2009

New-home construction fell sharply in October, underscoring the fragility of the fledgling housing recovery. Housing starts unexpectedly fell 10.6 percent to a seasonally adjusted 529,000 annual rate in October, compared with the prior month, the Commerce Department said Wednesday. That was a 30.7 percent drop from October 2008. Analysts were caught off guard by the news because many had expected an increase in new construction. Patrick Newport, U.S. economist for IHS Global Insight, called the plunge in housing starts a "shocker" in a note to clients. The stumble probably reflected trepidation from the building industry in October as uncertainty remained over whether Congress would extend the $8,000 tax credit for first-time buyers beyond its Nov. 30 deadline. Earlier this month, Congress extended the credit through April and expanded it to include move-up buyers. But whether the extension will translate into sales remains the subject of debate. The number of new building permits last month also fell, by 4 percent, to a seasonally adjusted annual rate of 552,000 from the previous month, the Commerce Department said. It dropped 24.3 percent from October 2008. - Los Angeles Times

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