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Housing Starts Exceed Forecasts

Building permits are lower than expected, which is good news for homebuilders.

Updated from 9:15 a.m. EST

Housing starts came in slightly higher than expected in November, rising 6.7% from October.

Total housing starts last month were at a seasonally adjusted annual rate of 1.59 million, up from October but down 26% from a year earlier, the U.S. Commerce Department said Tuesday. Economists expected a rate of 1.55 million starts, according to

Reuters

estimates.

Building permits came in at a seasonally adjusted annual rate of 1.51 million, down 3% from October and plunging 31% from a year earlier. Economists expected a rate of 1.54 million.

The rate marked the lowest level of permit activity since December 1997, noted Bank of America analyst Daniel Oppenheim.

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The drop in permits is a particularly good sign for homebuilders, who are facing a very tough home-sale environment amid high inventories.

"We view the decline as a positive, as continued construction discipline is needed to work through the excess supply," Oppenheim wrote in a research note.

After the market closed Monday,

Hovnanian

(HOV)

reported that it swung to a

fiscal fourth-quarter loss because of large land impairment charges and write-offs of land option contracts that stem from the tough sales environment.

The company's contract cancellation rate for the fourth quarter was 35%, up from 25% in the fourth quarter of 2005 and 33% in the third quarter of fiscal 2006.