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Initial construction of U.S. homes rose far less than predicted in September, according to a government report released Tuesday.
Housing starts increased to a seasonally-adjusted annual rate of 590,000 last month, up 0.5% above a revised 587,000 in October, the Commerce Department said.
Economists were expecting housing starts to jump to 610,000, according to consensus estimates compiled by Briefing.com. Starts are down 28.2% from September 2008.
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New construction of single-family homes, the key sector of the housing market, increased 3.9% to an annual rate of 501,000 versus 482,000 in August.
"The rebound following the post-Lehman panic seems to be over," wrote Ian Shepherdson, analyst at High-Frequency Economics, in a research note.
Shepherdson added that uncertainty about a possible extension and expansion of the $8,000 tax credit for first-time homebuyers "is making builders understandably nervous about the near-term outlook."
The credit now can be claimed by anyone buying a home who has not owned one for three years and who closes the deal by Nov. 30. Congress is considering extending the deadline and expanding it to all but the wealthiest homebuyers.
Despite the overall housing starts drop, multi-family homes increased. New construction of buildings with 5 or more units increased to an annual rate of 104,000, up 7.2% from 97,000 in August.
Applications for building permits, which are a gauge of future construction activity, also missed predictions. Permit applications fell 1.2% to a seasonally adjusted annual rate of 573,000. Economists were expecting permits to rise to 595,000.
"Permits were weaker than starts, suggesting the latter will dip in October," Shepherdson wrote. "We remain optimistic for 2010 but the next couple of months will be tricky."
Regional: New home construction was flat in the Northeast, holding at a 62,000 unit rate, and in the Midwest at 100,000 units. Starts fell by 1.7% in both the South and the West.
