Housing Starts Fall 4.3%, Permits Up 16.7%

WASHINGTON (TheStreet) -- Homebuilders began construction on 4.3% fewer homes in December, worse than the expected growth rate, while applications for building permits spiked 16.7%, pointing to potential strengthening in demand for future homebuilding activity.

The Commerce Department said early Wednesday that housing starts came in at a seasonally adjusted annual rate of 529,000 in December. The figure compares with an upwardly revised rate of 553,000 housing starts in November and came in worse than the rate of 550,000 economists had expected, according to consensus estimates listed on Briefing.com. November's housing starts rate was originally reported at a pace of 555,000.

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Applications for building permits spiked 16.7% to a seasonally adjusted annual rate of 635,000, much higher than the revised November rate of 544,000. November's building permits rate was originally reported at 552,000.

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

On Tuesday, the National Association of Homebuilders' index of builder sentiment came in flat month-over-month at a reading of 16. It was the third consecutive month of flat homebuilder sentiment as interest among potential buyers remained sluggish.

The NAHB's confidence index, which measures builder perceptions of current single-family home sales and sales expectations for the next six months, has not come in with a positive reading since April 2006. Any reading below 50 indicates poor sentiment.

"As we emerge from the traditionally slow holiday season, builders continue to look for signs of improvement in the economy, home buyer demand and builder and consumer credit conditions," said 2011 NAHB Chairman Bob Nielsen, a home builder from Reno, Nev. "Unfortunately, a severe lack of construction financing, and widespread difficulties in obtaining accurate appraisal values, continue to limit builders' ability to prepare for anticipated improvements in buyer demand in 2011."

NAHB Chief Economist David Crowe said that "At this point, housing remains on the sidelines of a weak economic recovery as consumers and builders wait for clear and consistent indications that jobs and economic output are reviving. Meanwhile, the problems that builders continue to confront in obtaining production financing, and in maintaining performing lines of credit, threaten to significantly slow the onset of a housing recovery."