Home-construction starts, permits plunge unexpectedly

 Construction of new homes unexpectedly plunged last month, as builders waited to see whether lawmakers would extend
a tax credit for homebuyers.

The results show how much the housing market has been relying on government support
for its fledgling recovery. The tax credit of up to $8,000 for first-time owners was due to expire on Nov. 30, but Congress
voted to extend it earlier this month and expand it to more buyers, after intense pressure from real estate agents and homebuilders.

"The end of the tax credit was looming," said David Crowe, chief economist at the National Association of
Home Builders. "At that point, builders were real uncertain about whether it would ever be extended, so they pulled way
back."

A strong housing market is needed to support a broad economic recovery, and the building industry says
the government’s support is essential.

The Commerce Department said Wednesday that construction of new homes and
apartments fell 10.6 percent in October, to a seasonally adjusted annual rate of 529,000, from an upwardly revised 592,000
in September. That’s the lowest level since April, and economists polled by Thomson Reuters expected a pace of 600,000.

Buyers who have owned their current homes for at least five years are now eligible for tax credits of up to $6,500,
while first-time homebuyers would still get up to $8,000. To qualify, buyers have to sign a purchase agreement by April 30.

Applications for building permits, a gauge of future activity, fell 4 percent, to an annual rate of 552,000 units.
That was the lowest since May and missed analysts’ expectations of 580,000. But permits for single-family homes fell only
0.2 percent.

Meanwhile, the National Association of Home Builders said Tuesday its housing market index remained
unchanged in November, reflecting a cautious outlook from residential developers as they waited to learn the credit’s fate.

The trade association said its index stood at 17 for the second straight month. Index readings below 50 indicate negative
sentiment about the market.

Please enable JavaScript to view this content.

Editor's note: You can comment on IBJ stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Please note our updated comment policy that will govern how comments are moderated.

{{ articles_remaining }}
Free {{ article_text }} Remaining
{{ articles_remaining }}
Free {{ article_text }} Remaining Article limit resets in {{ count_down }} days.