Builders in the U.S. unexpectedly began work on more homes in September, a sign the real estate market is stabilizing at depressed levels. Housing starts rose to a 610,000 annual rate, the most since April and up 0.3 percent from a revised 608,000 rate in August that was higher than previously estimated, Commerce Department figures showed today in Washington. Building permits dropped to the lowest level in more than a year, reflecting a plunge in multifamily units that are often volatile. The industry that precipitated the worst recession since the 1930s may be starting to stabilize after a government tax credit pulled demand into late 2009 and early this year. At the same time, mounting foreclosures, near record-low home sales and a lack of jobs mean any rebound will take time to develop. “The worst of the housing market downturn may be behind us, but the path to recovery is likely to be long and slow,” Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit, said before the report. The median forecast of 71 economists surveyed by Bloomberg News projected September starts would drop to a 580,000 annual pace from a previously estimated 598,000 rate in August. Estimates ranged from 550,000 to 624,000. Building permits, a proxy for future construction, decreased 5.6 percent to a 539,000 annual rate in September, the lowest level since April 2009. They were projected to be little changed at 575,000, according to the median estimate in the survey. Applications for multifamily units dropped 20 percent, while those for single-family homes climbed 0.5 percent. Year-Over-Year Starts were up 4.1 percent in September from the same month last year, while permits decreased 11 percent. Construction began on single-family houses at a 452,000 annual pace, up 4.4 percent from August and the most since May. Work on multifamily homes, such as townhouses and apartment buildings, fell 9.7 percent to an annual pace of 158,000 after surging 42 percent the prior month. Starts increased in two of four regions, led by a 4.8 percent in the South, the largest area. The Northeast saw a 2.9 percent increase as single-family construction soared 67 percent. Work began on 8.2 percent fewer houses in the Midwest and 3.6 percent fewer in the West. Sales have see-sawed as a result of the government incentive that was worth up to $8,000. Purchases contracts had to be signed by the end of April to qualify for the tax break. After reaching a 19-month high 414,000 annual rate in April, sales of new houses plunged to a record low 282,000 pace in May. Mounting Foreclosures With foreclosures reaching a record in September, U.S. regulators last week said they were investigating whether employees of lenders including Ally Financial Inc., JPMorgan Chase & Co. and Bank of America Corp. had falsified documents used in the proceedings. Ally Financial and JPMorgan are among banks that have suspended some foreclosures or evictions to review paperwork, which may further delay a recovery in housing. The Obama administration is concerned that halting foreclosures would hold up home sales, threatening the recovery in the housing market, White House Press Secretary Robert Gibbs said last week. With the approaching Nov. 2 congressional elections, Americans continue to have a dimmer view of Congress and President Barack Obama’s handling of the economy. Obama’s job approval in the week ended Oct. 17 was 45 percent, compared with an average 57 percent last year, according to a poll from Princeton, New Jersey-based Gallup. Too-Slow Recovery Housing’s inability to rebound is one reason the economic recovery hasn’t strengthened. Ben S. Bernanke is among policy makers that have said the too-slow recovery has kept the jobless rate too high and inflation too low. The chairman of the Federal Reserve last week said additional monetary measures may be needed to spur growth. Speculation that the central bank may pursue large-scale asset purchases has pushed down yields on U.S. Treasury securities, driving mortgage rates to record lows. Builders this month were less pessimistic. The National Association of Home Builders/Wells Fargo’s confidence index released yesterday rose in October to the highest level in four months. Nonetheless, the reading of 16 was well short of the 50 level that signals the outlook is equally balanced between optimists and pessimists. KB Home, the Los Angeles-based homebuilder that focuses on first-time buyers, last month reported a smaller third-quarter loss as revenue increased for the first time in almost four years. KB has been cutting costs amid the slump in sales and is seeking to lure buyers with houses that are smaller and less expensive than older designs. Lennar Corp. is among homebuilders finding other ways to boost earnings as sales languish. The Miami-based company, the third-biggest U.S. homebuilder by revenue, reported better-than- estimated earnings on Sept. 20, boosted by improved margins and revenue from its distressed-investing unit. To contact the reporter on this story: Bob Willis in Washington at Bobwillis@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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