WASHINGTON — Applications for home-building permits, a gauge of future construction, fell in September by the largest amount in five months — a discouraging sign for the housing industry.
The decline, in part, reflected uncertainty about whether Congress will extend a tax credit for first-time homebuyers.
At the same time, the Commerce Department said Tuesday that construction of new homes and apartments rose 0.5 percent last month to a seasonally adjusted annual rate of 590,000 units. That was a weaker showing than the 610,000 economists had expected.
The applications for building permits fell 1.2 percent in September. That’s the biggest decline since a 2.5 percent drop in April and underscored worries that the fledgling housing revival could be derailed by rising unemployment, tighter bank lending standards and the expiration on Nov. 30 of the government’s $8,000 tax credit for first-time homebuyers.
Housing has been struggling to recover this year following a steep collapse that helped pull the overall economy into the worst recession since the 1930s.
Real estate agents and homebuilders are lobbying Congress to extend the tax credit, an effort appears to be gaining momentum, but the administration is being vague about its position.
Sen. Johnny Isakson, R-Ga., who spent his career as a real estate agent before being elected to Congress, said “this market is going to die a sudden death” without an extension.
Isakson and Sen. Christopher Dodd, D-Conn., chairman of the Senate’s banking committee, want to extend the credit until June 30 and drop the requirement that the credit be available only to first-time buyers. That’s estimated to cost $16.7 billion.
The lawmakers have suggested that their measure be attached to an extension of federal assistance to the millions in danger of exhausting unemployment insurance benefits.
Housing Secretary Shaun Donovan said at a congressional hearing Tuesday that supporting the housing market “can be very expensive, especially at a time of significant budget deficits.”
The administration will make a recommendation on whether to extend the credit in the coming weeks.
While there would be some negative effects if it were allowed to expire, Donovan said, “I do not believe that a catastrophic decline would be the result.”
Some analysts and lawmakers are skeptical about extending the credit, arguing that most homebuyers who receive it would have decided to buy anyway. And soaring unemployment is likely to dull the impact of any extension, Mark Vitner, a senior economist with Wells Fargo Securities, wrote in a note to clients.
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