Construction Spending Steady

WASHINGTON D.C. ( TheStreet) -- Construction spending was better than expected in October, reaching a level virtually equivalent to September -- a surprise result that has sent shares in the homebuilding sector higher in Tuesday morning trading.

The Census Bureau monthly report did not show significant growth in construction, but remaining flat is good when the market actually had been predicting a drop in construction spending.

The rationale behind the expected drop was that the September increase -- which had shown the biggest gain in housing activity since July 2003 -- reflected a last minute rush to get homes built ahead of the looming expiration of the first-time home-buyer tax credit. With the October numbers, it was expected that the tax-credit rush would be taken out of the equation and the numbers would fall off as a result.

In October, construction spending was estimated at a seasonally adjusted annual rate of $910.8 billion, nearly the same as the revised September estimate of $910.4 billion. The October figure is 14.4% below the October 2008 level.

Most of the major homebuilder stocks rallied on Tuesday, with gains of between 1%-3%, led by Ryland Group ( RYL), which was up 3.2% at the close. The Tuesday rally followed a Monday swoon and poor year-end outlook for most of the homebuilding sector.

Spending on private construction was at a seasonally adjusted annual rate of $589 billion, 0.3% above the revised September estimate of $587.2 billion. Residential construction was the biggest bright spot in the report, at a seasonally adjusted annual rate of $250.3 billion in October, 4.4% above the revised September estimate of $239.7 billion.

Nonresidential construction was down -- as expected by the market forecast -- at a seasonally adjusted annual rate of $338.6 billion in October, 2.5% below the revised September estimate of $347.5 billion.

The annual rate of public construction spending was lower also, at $321.8 billion, or 0.4% below the revised September estimate of $323.2 billion.

Educational construction was at a seasonally adjusted annual rate of $85.7 billion, 1.1% above the revised September estimate of $84.7 billion.

Highway construction was at a seasonally adjusted annual rate of $87.2 billion, 0.3% below the revised September estimate of $87.4 billion.

-- Reported by Eric Rosenbaum in New York.

Follow TheStreet.com on Twitter and become a fan on Facebook.

Copyright 2009 TheStreet.com Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

More from Stocks

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Trump's 'Space Force' Could Launch a $1 Trillion Industry, Morgan Stanley Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says

Abiomed Stock Should Rise Some 12% From Here, Piper Jaffray Analyst Says

Video: Here Is Why Carvana Isn't Worried About Amazon

Video: Here Is Why Carvana Isn't Worried About Amazon

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

Video: What Oprah's Content Partnership With Apple Means for the Rest of Tech

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat

REPLAY: Jim Cramer on the Markets, Oil, Starbucks, Tesla, Okta and Red Hat