A mixed report on housing front

Home-construction starts fell 11.7 percent in October, but a more closely watched figure - the number of building permits for single-family homes - rose for the first time in seven months.

The Commerce Department reported Wednesday that single-family permits rose 1.1 percent. Overall, building permits rose 0.5 percent after hitting a 17-month low in September.

"Permits matter more because they are better measured, less affected by seasonality, and are forward-looking," said economist Patrick Newport, of IHS Global Insight Inc., of Lexington, Mass.

Multifamily-building permits were basically flat, dipping 0.7 percent from September's levels.

Economists were surprised that housing starts fell so much. But in recent months, Newport said, starts have increased relative to permits.

"When this happens, builders adjust by slowing down the pace of construction," he said. Though economists expected that would take two or three months to accomplish, "it took place in October."

For two years, home builders have put up an average of 575,000 units, measured at an annual rate, each month. In a normal market, it would be at least 1.5 million units per month annualized.

The slump is attributable to three factors: U.S. household formation is down because of continued high unemployment and reduced immigration, financing is hard to obtain, and builders are still competing with a glut of lower-price foreclosure sales in the West and South.

Builders continue to be cautious about starting projects, said Bob Jones, chairman of the National Association of Home Builders.

Said economist Joel L. Naroff, of Naroff Economic Advisors in Bucks County: "It would be nice to see housing starts show some strength soon, but given the foreclosure overhang, it is hard to see that happening. It is unrealistic to expect home construction to perk up quickly."

The market for previously owned homes is not faring much better. Third-quarter data compiled by Kevin Gillen, vice president of Econsult Corp. of Philadelphia, show that this region's market "went slack again this summer after the tax credit's expiration."

The typical Philadelphia-area home declined in value by an average 5.5 percent, Gillen said, erasing the gains of the spring, when prices rose 4 percent regionwide.

The value of a typical city home fell 4.6 percent, with a 5.8 percent slip in the suburbs. Since the third quarter of 2007, he said, prices in the region have fallen 15 percent.

Sales volume is tanking, as well. Just 11,638 homes went to settlement in this region (the city; Delaware, Montgomery, Bucks, and Chester Counties in Pennsylvania; Gloucester, Camden, Burlington, Salem, and Mercer Counties in New Jersey; and New Castle County, Del.).

That represents a 30 percent drop from the third quarter of 2009 and is 36 percent below second-quarter 2010 levels.