US housing starts hit a five-month high in September, a tentative sign of healing in the housing market, though permits for future home building fell as approvals in the volatile multi-family segment tumbled.
The data today had little impact on expectations the Federal Reserve would ease monetary policy further at its November 2nd-3rd meeting to shore up the economy and prevent a damaging downward spiral in prices.
The Commerce Department said housing starts rose 0.3 per cent to a seasonally adjusted annual rate of 610,000 units, the highest level since April. August starts were revised up to a 608,000-unit pace from the previously reported rate of 598,000 units.
Economists had expected housing starts to slip to a 580,000-unit rate. Compared to September last year, housing starts were up 4.1 per cent.
"This is not a strong report, but does suggest some bottoming," said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut.
Analysts said the housing data did not alter the view that the US central bank would ease further.
The Fed, which has already taken benchmark interest rates effectively to zero and bought some $1.7 trillion in Treasury and mortgage-related debt, is almost certain to launch a second round of quantitative easing next month.
"Regardless of what happens with the data this week, QE2 is still coming," said Zach Pandl, US economist at Nomura Securities International in New York.
US stock index futures held steady at lower levels after the data, as investors continued to focus on an interest rate hike in China and poor earnings from technology titans Apple and IBM.
US Treasury debt prices extended losses on the report, while the dollar was steady at higher levels.
New building permits dropped 5.6 per cent to a 539,000-unit pace last month after an unrevised 2.1 per cent increase in August. Permits were dragged down by a 20.2 per cent tumble in multi-family units. Permits for single-family homes rose 0.5 per cent last month.
Economists had expected overall building permits to rise to a 580,000-unit pace in September.
Though the housing market is starting to settle down after hefty declines following the expiration of a government tax credit for home buyers, an overhang of unsold homes is stifling recovery.
A survey yesterday showed sentiment among home builders edged up this month, but remained at depressed levels.
Groundbreaking last month was lifted by a 4.4 per cent increase in single-family home construction. Starts for the volatile multi-family segment fell 9.7 per cent.
Home completions rose 7.3 per cent to a 648,000-unit pace. The inventory of total houses under construction fell 1.6 per cent to a record low 437,000 units last month, while the total number of units authorized but not yet started dropped 6.9 per cent to an all-time low of 81,100 units.
Reuters