New Building Permits Fall to a Five-Year Low

Construction of new homes and apartments rose unexpectedly in September, but new building permits, a barometer of future confidence, fell more than expected to a five-year low, offering consumers a mixed snapshot of the new homes market.

September housing starts rose 5.9 percent over August, coming in at an annual pace of 1.772 million units, Commerce Department figures showed. Economists had predicted September starts would fall to 1.64 million units. Starts had fallen for three consecutive months, reflecting the significant slowdown seen in the real estate market.

Even with September's uptick, however, housing starts were down 17.9 percent from a year earlier.

The rise in starts was concentrated in the southern region of the country; the Washington metropolitan region is considered part of the South by the Commerce Department. Starts jumped 14 percent in the South, as groundbreaking on single-family homes rose by nearly 9 percent.

The good news on starts, though, was overshadowed by the fact that new building permits plunged 6.3 percent in September to their lowest rate since October 2001. Permits were down to an annual pace of 1.619 million units, which will be reflected by a weakness in starts in the coming months. Permits are down 27.7 percent from the same time a year ago.

"Some solace can be taken from the fact that builders seem to have responded quickly to signs of weakening demand and are cutting back supply sharply," said Omair Sharif, an analyst at RBS Greenwich Capital, said in a statement. "After jumping by 46 percent from December 2001 to January 2006, one-family starts have fallen by 21 percent from January through September, suggesting that the correction necessary to return to a sustainable pace of groundbreaking activity is well underway."