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New home construction rebounded

Construction of new homes and apartments rebounded in October by the largest amount in eight months but the unexpected increase was not viewed as a signal of a housing turnaround.
/ Source: The Associated Press

Construction of new homes and apartments rebounded in October by the largest amount in eight months but the unexpected increase was not viewed as a signal of a housing turnaround.

The Commerce Department reported Tuesday that housing construction rose by 3 percent in October, the first increase after three months of declines and the biggest advance since a 6 percent rise last February.

However, all of the strength came in the volatile apartment sector, which jumped by 44.4 percent. Construction of single-family homes fell for a seventh straight month, declining by 7.3 percent in October compared to September.

Analysts believe that housing is likely to remain weak through much of 2008 as builders struggle with historically high levels of unsold homes and rising mortgage defaults which are dumping even more homes back on glutted markets.

The overall increase left construction in October at a seasonally adjusted annual rate of 1.229 million units, down 16.4 percent from activity a year ago.

Applications for building permits, seen as a good sign of future activity, fell for the fifth straight month in October, dropping by 6.6 percent to an annual rate of 1.178 million units. That is down a sharp 24.5 percent from a year ago.