New Home Starts Decline in October

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(WASHINGTON, D.C.) -- Nationwide housing production fell 10.6 percent to a seasonally adjusted annual rate of 529,000 units in October as builders awaited word on whether an important home buyer incentive would be extended, according to data released today by the U.S. Commerce Department.

"As of October, the deadline for starting a home that could be completed in time for purchasers to take advantage of the $8,000 first-time home buyer tax credit had come and gone, and builders had no clear sign of whether Congress would extend the credit beyond the end of November," explained Joe Robson, chairman of the National Association of Home Builders (NAHB) and a home builder from Tulsa, Okla. "However, now that Congress has wisely moved to extend the tax credit into next year and expand its eligibility to more buyers, we hope and expect that this will have a substantial stimulative effect on home sales and help keep the housing market solidly on the road to recovery."

"Builders were clearly in a holding pattern in October as the future of the home buyer tax credit hung in the balance," agreed NAHB Chief Economist David Crowe. "This is not surprising, given the fact that the tax credit had been the primary driver of construction and sales in the summer and early fall.  However, the fact that permits for single-family construction remained roughly unchanged in the month is an indication that builders are preparing for the possibility of more favorable housing market conditions in the future. That said, significant challenges continue to confront builders with regard to obtaining financing for viable projects and appropriate appraisal values on newly built homes."

Single-family housing starts declined 6.8 percent in October to a seasonally adjusted annual rate of 476,000 units, the slowest pace since May of this year. Meanwhile, multifamily housing starts fell by a dramatic 34.6 percent to a seasonally adjusted annual rate of just 53,000 units - the slowest pace on record.

Combined starts activity fell across the board in October, with the Northeast posting an 18.8 percent decline, the Midwest a 10.6 percent decline, the South a 9.6 percent decline and the West an 8.5 percent decline, respectively.

Permit issuance, which can be an indicator of future building activity, fell 4 percent overall in October to a seasonally adjusted annual rate of 552,000 units, due primarily to a double-digit drop-off on the multifamily side. While single-family permits held virtually flat at 451,000 units, multifamily permits were down nearly 18 percent to 101,000 units.

Regionally, permit activity was mixed, with the Northeast posting no change for the month, the Midwest registering a 2 percent gain, the South posting a 5.8 percent decline and the West posting a 6.7 percent decline, respectively.

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