Housing Starts Hit Hard Stop in October

(Updated to include movement in homebuilder stocks)

WASHINGTON, D.C.(TheStreet) -- October housing starts reversed an upward trend, falling to their lowest level in six months. The news out of the home construction market was doubly disappointing, as permits for new home construction also fell 4% to 552,000, well short of analysts' forecast of 580,000 units.

Just when we thought we were out of the woods.

The Commerce Department report showed that housing starts fell 10.6% to their lowest level since April, or to 529,000 units. A Reuters' analysts' poll had estimated 600,000 units. Instead, the report delivered the biggest percentage drop since January. In September, there were 592,000 housing starts.

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The housing market has been sending mixed signals throughout its modest comeback. The September numbers, for example, showed a rise in new starts, but that came alongside a drop in permits.

While both housing starts and permits fell in October, the monthly numbers may end up being less distressing than they at first suggest: the looming expiration of the federal tax credit for first-time home buyers -- expected to expire at the end of October, but since renewed -- might have temporarily put a scare into, and freeze on, builders' appetites. The tax credit has been a big boon to the sector's turnaround.