Housing starts edge higher

By Les Christie, staff writerDecember 16, 2010: 9:57 AM ET

NEW YORK (CNNMoney.com) -- New home construction is not dead, just resting comfortably.

The number of new private home starts rose in November to a seasonably adjusted annualized rate of 555,000, according to a Commerce Department report. That was 3.9% above revised October figures but 5.8% lower than a year ago.

The numbers were higher than expected. A consensus of housing industry experts surveyed by Briefing.com had predicted 545,000 starts for the month.

New construction has been running at just a fraction of its housing-boom self. At the peak of the market in 2005, more than 2 million homes were built.

"The construction industry is limping along toward the end of a lousy year," said Mike Larson, a housing industry analyst for Weiss Research.

Larson did glean one positive out of the report -- a seven-month high in starts for single-family homes -- which came in at 465,000, up 6.9% from October. It was a dearth of multi-family starts that dragged the overall numbers down.

Another indicator of future housing market health, the number of housing construction permits that builders applied for, fell in November. There were 530,000 permits issued, which was down both compared with October (- 4%), and 12 months ago (-14.7%). Permits also came in well below forecasts of 560,000.

For Larson, those negative numbers provided further evidence that, "2011 will be another rebuilding year, if you pardon the pun. There will be no robust recovery for housing as usually happens when coming out of a recession."

Kevin Brundgart, CEO of mortgage lender RoundPoint Financial, points out that low consumer confidence is playing a role in depressing the housing market, especially for new homes.

"We've reached no acknowledged bottom on home prices," he said. "That has altered buyer psychology a bit. They may not be thinking about investing in homes."

High inventories of existing homes, including many repossessed properties coming onto the market at low, low prices, has also claimed some of the market share that would normally go to the new construction.

That should only worsen with as many as 12 million mortgage borrowers in danger of losing their homes to foreclosure over the next two years. If even a fraction of those repossessions occur, it will flood the housing market and further lower demand for new homes. 

#cnnfb_connect {background-color:#f5f5f5;width:auto;height:auto;padding:10px;clear:both;} First Published: December 16, 2010: 9:01 AM ETRight Now

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Making subtle changes to your retirement investments can prepare you for the worst and amp up your nest egg. Sell, trade or donate those holiday gift cards you?ll never spend. Technology, health care and manufacturing are the ripest sectors for growth according to investment strategists Liz Ann Sonders and Sam Stovall. 

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