(Updated with additional information, commentary and background details).
) -- Homebuilders began construction on 0.3% more homes in September, a better-than-expected expansion, though applications for building permits fell 5.6%, pointing to a decrease in future homebuilding activity.
The Commerce Department said early Tuesday that housing starts came in at a seasonally adjusted annual rate of 610,000 in September, the third straight month of expansion and better than the rate of 579,000 economics expected, according to consensus estimates listed on
. It also represents the highest level of home starts since April of this year, and a 4.1% increase over year-earlier results. The figure compares with a
revised pace of 608,000 reported for August.
Applications for building permits fell 5.6% to a seasonally adjusted annual rate of 539,000, compared with a month-earlier report of 571,000. September's rate of building permits was the lowest since April 2009, and 11% lower than year-earlier results, underscoring the volatility of building multifamily units.
Building permits are viewed as an indication of future home construction.
Starts of new single-family homes rose by 4.4% to an annualized rate of 452,000 last month. Starts of multifamily homes, such as townhouses and apartment buildings, fell 9.7% to an annual pace of 158,000, after soaring 42% in September.
A rise in housing starts and fall in building permits points to the beginnings of stabilization in the still-uncertain housing market, even if that stabilization is at fairly depressed levels of activity.
The U.S. housing market has been under tremendous pressure for some time. Demand fell further after the
"The worst of the housing market downturn may be behind us, but the path to recovery is likely to be long and slow," Russell Price, a senior economist at Ameriprise Financial, told
Stocks in the homebuilder sector were mixed in premarket trading Tuesday after the housing starts report was released. The
SPDR S&P Homebuilders
, an exchange-traded fund that tracks the sector, was 0.1% higher, while the
iShares Dow Jones US Home Construction
ETF was flat.
Among individual builders,
On Monday, the
National Association of Home Builders reported that its index of builder sentiment, , which measures builder perceptions of current single-family home sales and sales expectations for the next six months, came in higher than expected, jumping three points to a reading of 16 in October, surprising industry watchers who expected the index to come in flat at 13. The index's components include current sales conditions, sales expectations and traffic of prospective buyers -- all of which rose in October.
While it was the index's first improvement in five months, returning the reading to levels last seen in June of 2009, results still pointed to a weak housing environment. Any reading below 50 indicates poor sentiment. The index has not been above 50 since April 2006.
"Builders are starting to see some flickers of interest among potential buyers, and are hopeful that this interest will translate to more sales in the coming months," said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. "However, because most builders still have no access to credit for building homes, there is a real concern that we will not be able to meet the pent-up demand when consumers are ready to get back in the market. This problem threatens to severely slow the housing and economic recovery."
"The new-homes market is finally moving past the lull that occurred when the home buyer tax credits expired and economic growth stalled this summer," noted NAHB Chief Economist David Crowe. "While challenges such as competition from foreclosures, inaccurate appraisal values, and general consumer uncertainty about the economy and job market continue to be major factors, builders have seen a slight increase in consumers who are considering a home purchase. The toughest obstacles really come down to financing - the scarcity of construction credit for builders along with tougher mortgage requirements for consumers."
Hesitancy among potential home buyers had been a key driver of builders' low sentiment in recent months as uncertain consumers did not yet feel secure enough with the jobs market and overall economy to make such large purchasing decisions. That potential buyers are beginning to show increased interest is a welcome sign of future sales potential.
Record-low and near-record-low mortgage rates failed to spark robust demand for housing in recent months, but clearly had an effect on homeowners looking to lower their monthly payments through refinancing.
Mortgage applications rose for the first time in six weeks in the week ended Oct. 8, as 30-year fixed
A total of 83.1% of all loan applications in the week were for refinancing existing mortgages, up from 78.9% in the prior week and the highest refinance share since January 2009.
Mortgage loan applications spiked 14.6% on a seasonally adjusted basis, the Mortgage Bankers Association said last week. Refinancing applications soared 21% from the previous week. New-home purchase loan applications decreased by 8.3% from the prior week and were 37.1% lower than in the year-earlier week.
Just as the subprime mortgage troubles expanded into a total housing market downfall, the latest scandal in the home loan industry is expanding into a nationwide political firing line aimed -- once again -- toward the banks due to
Stifel Nicolaus analyst Chris Mutascio noted last week that while the call for a nationwide foreclosure moratorium is "growing in seemingly every political circle in recent days," it is undecided if the banks should take full blame.
"Is this just political rhetoric from politicians once again blaming the banks for all the ills upon us or are there some merits to it? We are not sure we really know the answer to that question yet, but let's keep one thing in mind during the debate. If there is any way a bank can keep a borrower in his/her home, it behooves the bank to do so from an economic perspective, in our view," the Stifel note said.
"Many homeowners are waiting for the elections next month hoping that more certainty about taxes, bank regulations and other factors will give Americans confidence to move forward with important monetary decisions," Alan Rosenbaum, president of Guardhill Financial, a New York-based mortgage banker and brokerage company, told
"The lower interest rates on mortgages have spurred refinancing and purchase activity, though not currently as much as hoped for," he said, adding that "the government states that they want to keep rates low so that homeowners will buy and refinance to spur the economy, but they continue to keep underwriting guidelines too strict for most Americans to qualify for a mortgage."
-- Written by Miriam Marcus Reimer in New York.
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