New construction increased in October

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Construction of new homes and apartments increased by 3 percent in October—the largest amount since February and the first increase in three months, according to the U.S. Department of Commerce.

However, this does not indicate a solid rebound in housing. The growth came from the apartment sector, which jumped 44.4 percent; construction of single-family homes fell for a seventh straight month with a 7.3 percent decline from September to October.

The overall increase left construction in October at a seasonally adjusted annual rate of 1.229 million units, which is a 16.4 percent decrease compared with a year ago. Analysts are concerned about a recession, saying the significant amount of unsold homes and rising mortgage defaults most likely will continue to weaken the housing market in 2008.

Applications for building permits, which generally help gauge future activity, decreased 6.6 percent in October to an annual rate of 1.178 million units—down 24.5 percent compared with a year ago.

The Federal Reserve has cut interest rates twice since September but has signaled it does not plan to cut any further unless the economic trouble becomes significantly worse.

11/26/2007

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