(RTTNews) - While the Commerce Department released a report on Tuesday showing a modest increase in housing starts in the month of September, starts came in well below economist estimates due in part to a downward revision to the previous month’s data.

The report showed that housing starts edged up 0.5 percent to an annual rate of 590,000 in September from the revised August estimate of 587,000. Economists had expected starts to rise to 610,000 from the 598,000 originally reported for the previous month.

Single family starts increased by 3.9 percent compared to the previous month, although the growth was partly offset by a 23.5 drop in new construction of multi-family homes.

Commerzbank analyst Christoph Balz said, “After having slumped dramatically until early 2009, the housing market is probably past the low point in the current cycle.”

“No more than a lame recovery, however, should be expected due to the still relatively high level of unsold homes,” Balz added.

The Commerce Department said that housing starts increased in only one region of the country, rising by 7.1 percent in the South.

At the same time, housing starts in the West and the Northeast fell by 8.8 percent and 5.5 percent, respectively, while starts in the Midwest decreased by a more modest 1.8 percent.

Additionally, the report showed that building permits, an indicator of future housing demand, fell 1.2 percent to an annual rate of 573,000 in September from the revised August rate of 580,000.

The drop in building permits came as a surprise to economists, who had expected permits to increase to 595,000 from the 579,000 originally reported for the previous month.

A 3.0 percent drop in building permits for single-family homes contributed to the unexpected decrease, more than offsetting a 7.2 percent increase in permits for multi-family homes.

Peter Boockvar, equity strategist for Miller Tabak, said, “With the housing tax credit possibly about to expire, the drop in single family permits was not a surprise and buyers rushed to take advantage of it going into September, thus helping starts.”

“I highlight permits because the recent trends in starts becomes irrelevant in extrapolating future building IF the tax credit doesn’t get extended, as we’ll have another Cash For Clunker type hangover,” Boockvar added.

The $8,000 tax credit for first time homebuyers that was enacted under the government’s stimulus package is currently set to expire on December 1st, although certain lawmakers are seeking to extend the credit.

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Posted in Categories: Economy, Forex, Releases, USA.

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