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New residential construction falls 11.7% in October

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Construction on new residential buildings fell 11.7% in October, far worse than many analysts had expected and providing fresh evidence that the real estate market is struggling.

The Commerce Department reported that housing starts fell to a seasonally adjusted annual rate of 519,000 in October, a 1.9% decline from October 2009.

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The weakness was concentrated in the market for buildings with multiple units: apartments and condominiums. That segment of the residential construction is industry is highly volatile and tends to vary from month to month.

Single-family home construction was also fairly anemic in October, with starts falling 1.1% from September to a rate of 436,000 units per month.

Michael D. Larson, an interest rate and housing analyst with Weiss Research, said home builders were struggling.

‘The construction industry remains mired in the muck,’ he said. ‘This should not come as a surprise. We have so many existing, distressed homes for sale already, and even more will hit the market once various foreclosure moratoriums expire. That means builders have little incentive to ramp up production, despite stabilization in sales rates.’

Regionally, starts dropped 30.5% in the West and 13.4% in the South. They rose 1% in the Midwest and 12.9% in the Northeast.

The number of permits issued on residential buildings was at a seasonally adjusted annual rate of 550,000 in October, up 0.5% from the month before but down 4.5% from October 2009.

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-- Alejandro Lazo

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