Applications for home-building permits, a gauge of future construction, fell in September by the largest amount in five
months — a discouraging sign for the housing industry.
The decline, in part, reflected uncertainty about
whether Congress will extend a tax credit for first-time homebuyers.
At the same time, the Commerce Department
said Tuesday that construction of new homes and apartments rose 0.5 percent last month, to a seasonally adjusted annual rate
of 590,000 units. That was a weaker showing than the 610,000 economists had expected.
The applications for building
permits fell 1.2 percent in September. That’s the biggest decline since a 2.5-percent drop in April and underscored worries
that the fledgling housing revival could be derailed by rising unemployment, tighter bank lending standards and the expiration
on Nov. 30 of the government’s $8,000 tax credit for first-time homebuyers.
Housing has been struggling to recover
this year following a steep collapse that helped pull the overall economy into the worst recession since the 1930s.
Real estate agents and homebuilders are lobbying Congress to extend the tax credit, an effort appears to be gaining momentum,
but the administration is being vague about its position.
Sen. Johnny Isakson, R-Ga., who spent his career as a
real estate agent before being elected to Congress, said "this market is going to die a sudden death" without an
extension.
Isakson and Sen. Christopher Dodd, D-Conn., chairman of the Senate’s banking committee, want to extend
the credit until June 30 and to drop the requirement that the credit be available only to first-time buyers. That’s estimated
to cost $16.7 billion.
The lawmakers have suggested that their measure be attached to an extension of federal assistance
to the millions in danger of exhausting unemployment insurance benefits.
Housing Secretary Shaun Donovan said at
a congressional hearing Tuesday that supporting the housing market "can be very expensive, especially at a time of significant
budget deficits."
The administration will make a recommendation on whether to extend the credit in the coming
weeks, after studying data on tax filings from the Internal Revenue Service. While there would be some negative effects if
it were allowed to expire, Donovan said, "I do not believe that a catastrophic decline would be the result."
Some analysts and lawmakers are skeptical about extending the credit, arguing that most homebuyers who receive it
would have decided to buy anyway. And soaring unemployment is likely to dull the impact of any extension, Mark Vitner, a senior
economist with Wells Fargo Securities, wrote in a note to clients.
"Many of the most likely buyers targeted
have already taken advantage of the program," he wrote.
Meanwhile, the Labor Department said wholesale prices
fell 0.6 percent last month on a drop in energy costs. Outside food and energy, core inflation fell 0.1 percent. In the 12
months ending in September, core wholesale prices rose a modest 1.8 percent.
The drop in wholesale prices was another
sign the recession had kept a lid on inflation. Last week, the government said consumer prices edged up a modest 0.2 percent
in September.
But the cost for a barrel of crude jumped $10 this month, hitting $75 for the first time in a year
last week and than passing $80 early Tuesday. The value of the dollar plunged in October and because crude is bought and sold
in the U.S. currency, international investors who can essentially buy more crude for less have rushed in to snap up oil contracts.
The 0.5-percent rise in overall housing construction in September followed a 1-percent drop in August that was revised
down from an initial estimate of a 1.5-percent gain.
Construction of single-family homes rose 3.9 percent last
month, to an annual rate of 501,000 units, reversing a 4.7-percent drop in August. Multifamily construction, a much smaller
and more volatile segment, posted a 15.2-percent drop following a 20.7-percent rise in August.
Construction rose
7.1 percent in the South, but all other regions showed weakness. Building activity fell 5.5 percent in the Northeast, 1.8
percent in the Midwest and 8.8 percent in the West.
An index from the National Association Home Builders that measures
builder confidence slipped slightly in October to a reading of 18, from 19 in September. Builders blamed the slippage on the
approaching expiration of the homebuyer tax credit.
The industry contends that extending and expanding the credit
for one year would generate nearly 350,0000 jobs and $11.6 billion in additional tax revenues.
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