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Housing Starts Rise 3.9% in November

(Housing starts report updated with analyst commentary.)

WASHINGTON ( TheStreet) -- Homebuilders began construction on 3.9% more homes in November, better than the expected growth rate, while applications for building permits fell 4%, pointing to a softening in future homebuilding activity.

>> Homebuilder Stocks: Behind the Numbers

The Commerce Department said early Wednesday that housing starts came in at a seasonally adjusted annual rate of 555,000 in November. The figure compares with an upwardly revised rate of 534,000 housing starts in October and came in better than the rate of 545,000 economists had expected, according to consensus estimates listed on Briefing.com. October's housing starts rate was originally reported at a pace of 519,000.

Despite better-than-expected results, housing starts in November remained 5.8% below year-earlier rates.

Applications for building permits fell 5% to a seasonally adjusted annual rate of 530,000, below the revised October rate of 552,000 and 14.7% below year-earlier rates. October's building permits rate was originally reported at 555,000.

Building permits are viewed as an indication of future home construction.

Thursday's disappointing building permits data further confirms that the "housing market recovery remains fragile at best," said Kevin Brungardt, CEO of RoundPoint Financial, a mortgage origination and servicing firm. He cited the usual suspects of high unemployment, potential buyers' low confidence in the stability of home prices and the large inventory of distressed properties that still need to be cleared.

Foreclosure activity declined dramatically in November , but Brungardt said the 21% month-over-month drop was "a false positive," a result of the so-called "robosigning" scandal that led to procedural delays and foreclosure moratoriums at servicers like Bank of America (BAC) and JPMorgan Chase (JPM). Even Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB), which stand behind the vast majority of U.S. mortgages, have said they won't push forward on foreclosures during the holiday season.

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