In October, as new home construction plunged to its lowest level since Apri, builders made a rapid about-face, catching analysts by surprise.
The 10.6% drop was likely due to builders ratcheting back new construction as they expected the tax credit for first-time home buyers to expire. The credit was then expanded and extended through April.
In October, new multi-family home starts were down 34.6%, The Commerce Department report also found that.
Wells Fargo economist Mark Vitner said the scare of government perks ending for first-time home buyers was similar to ripping a Band-aid off. ``We were hoping that when we took it off, the wound would have healed,'' he said. ``But it really hasn't so much. And it may be infected.''
Sending the Dow Jones Industrial Average down 11 points, the news helped spook the market out of a three-day winning streak.
With the tax-credit extension, many analysts still expect housing starts to recover.
The Labor Department said consumer prices rose 0.3% in October compared to the previous month, in a separate report, and the core consumer-price index, which excludes food and energy inputs, was up 0.2%.
The increase was greatly driven by higher energy costs and the biggest jump in new-car prices in two decades.
``The `cash for clunkers' program may have wiped out the '09 models that have been sitting there, but the brand-new 2010 models came, and they can command a higher price for those,'' James Brock, an economist at Miami University in Oxford, Ohio, who studies the auto industry, told the Associated Press.
The consumer price index, which is released every two months, for all urban consumers in the Miami-Fort Lauderdale metropolitan area, was up 0.5% in October versus August.
Even so, prices were down 0.6%versus year ago, amid steep declines in apparel,
Contributed by MLR Realty
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