Home Construction Bad on Paper and in Reality

 

Applications fall, building slows as D.C. discusses extending buyer tax credit. The 0.5 percent rise in overall housing construction in September followed a 1 percent drop in August that was revised down from an initial estimate of a 1.5 percent gain.
Courtesy Department of Commerce

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Applications for home building permits, a key gauge of future construction, fell in September by the largest amount in five months — a discouraging sign for the housing industry. A rebound in housing is needed to support a broader economic recovery.

Representatives for the industry told a congressional panel that the $8,000 tax credit for first-time buyers needs to be extended and expanded to ensure the housing sector will emerge from the recession.

But the Obama administration, facing soaring budget deficits, has not decided whether to support any extension. Some private economists played down the impact of such a move, arguing that most interested buyers already had taken advantage of the tax break.

Construction of homes and apartments rose 0.5 percent last month to a seasonally adjusted annual rate of 590,000 units. That was a weaker showing than the 610,000 economists had expected.

The applications for building permits fell 1.2 percent, the second setback in the past three months and the biggest decline since a 2.5 percent drop in April. It likely means construction will weaken a bit in coming months, partly because builders had accelerated projects to complete them before the tax credit expires Nov. 30.

Construction of single-family homes rose 3.9 percent to an annual rate of 501,000 units, reversing a 4.7 percent drop in August. Multifamily construction, a much smaller and more volatile segment, posted a 15.2 percent drop following a 20.7 percent rise in August.

Courtesy of Commerce Department