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Housing Starts Rise 10.5% in August

Homebuilders began work on more homes in August, and applications for building permits rose.

(Updated with more information and stock prices.)

WASHINGTON (

TheStreet

) -- Homebuilders began work on 10.5% more homes in August, and applications for building permits rose.

The Commerce Department said early Tuesday that housing starts came in at a seasonally adjusted annual rate of 598,000 in August, the highest level since April and better than the rate of 550,000 economics expected, according to

Briefing.com

. The figure compares with a downwardly revised pace of 541,000 reported for July. The August gain was the largest increase since November 2009.

Construction of new single-family homes rose 4.3% to a rate of 438,000 in August, compared with a decline of 6.7% in July. Construction of multifamily homes, including apartment buildings and townhouses, rose 32.2% to 160,000.

Applications for building permits ticked up 1.8% to 569,000, stronger than the 560,000 expected, compared with a month-earlier report of 559,000 building permits. July's rate was the lowest since May 2009.

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

Stocks in the homebuilder sector were mostly higher in premarket trading Tuesday after the housing report was released. The

SPDR S&P Homebuilders

(XHB) - Get SPDR S&P Homebuilders ETF Report

, an exchange-traded fund that tracks the sector, gained 1.4% ahead of the opening bell while the

iShares Dow Jones US Home Construction

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TheStreet Recommends

(ITB) - Get iShares U.S. Home Construction ETF Report

ETF rose 0.8%.

D.R. Horton

(DHI) - Get D.R. Horton, Inc. Report

jumped 2.3%,

Toll Brothers

(TOL) - Get Toll Brothers, Inc. Report

1.7%, and

Lennar

(LEN) - Get Lennar Corporation Class A Report

2.8% and

PulteGroup

(PHM) - Get PulteGroup, Inc. Report

2%.

KB Home

(KBH) - Get KB Home Report

, due to report its quarterly results Friday, bid up 2.8%.

On Monday

the National Association of Home Builders reported that its index of builder sentiment came in flat month-over-month in September as high unemployment and high foreclosure rates continued to dissuade people from considering new-home purchases.

>> Homebuilder Sentiment Holds Steady

.

The NAHB said early Monday its confidence index, which measures builder perceptions of current single-family home sales and sales expectations for the next six months, held steady with a reading of 13 in September, disappointing industry watchers who expected the index to edge up to a reading of 14. Any reading below 50 points to poor sentiment.

"In general, builders haven't seen any reason for improved optimism in market conditions over the past month," said NAHB Chairman Bob Jones. "If anything, consumer uncertainty has increased, and builders feel their hands are tied until potential home buyers feel more secure about the job market and economy."

Hesitancy among potential home buyers was a key driver of builders' low sentiment, according to the NAHB report.

"It also reflects the frustration that builders are feeling regarding the effects that foreclosed property sales are having on the new-homes market, with 87% of respondents reporting that their market has been negatively impacted by foreclosures," said NAHB Chief Economist David Crowe.

There were nearly 339,000 new foreclosures in August, according to RealtyTrac, bringing the nationwide number of foreclosed homes to 1.98 million.

Separately Monday,

homebuilder Lennar posted better-than-expected quarterly results, thanks to a greater number of home deliveries.

>>Lennar Beats on Return to Profitability

.

Earlier this month, homebuilder builder

Beazer Homes

(BZH) - Get Beazer Homes USA, Inc. Report

said it was

no longer sure new-home orders in fiscal 2010 would be higher than fiscal 2009's level of 4,205 homes

.

>>Beazer Homes: Hard Times Ahead

.

Beazer cited slower-than-anticipated improvements in new-home orders after the expiration of

homebuyers' tax credits

. The company said prospective homebuyers continue to exercise caution in committing to a home purchase as general economic conditions still haven't showed enough improvement.

Beazer reported 3,438 orders for new homes through June 30, meaning the company expected fourth-quarter new-home orders of at least 767 homes, the company explained.

>>Top Homebuilder Stocks to Buy Now

.

The housing market saw sales ramp up in March and April as consumers rushed to take advantage of tax credits that offered as much as $8,000 for first-time homebuyers and $6,500 for repeat buyers. Following the expiration of those credits on April 30, the market saw a dramatic decline in demand for the month of May that spilled over into June. Data for July showed a further drop in demand. Lawmakers later extended the deadline to close on a home purchase and still qualify for the tax credit to Sept. 30.

>>New-Home Sales: Winners & Losers

.**

-- Written by Miriam Marcus Reimer in New York.

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