U.S. home construction unexpectedly rose in September, reaching its highest level since government purchase incentives ended in April.
Housing starts grew 0.3%, to a seasonally adjusted annual rate of 610,000, from a revised August estimate of 608,000, the Commerce Department said Tuesday. Building permits, an indicator of future construction, fell 5.6%, to a seasonally adjusted annual rate of 539,000, from a revised August rate of 571,000.
The figures suggested that the market for new homes is stabilizing, though at a depressed level.
"The key point is that starts are still incredibly low by historical standards. They are still an eye-watering 75% below 2006's peak," said Paul Dales, an economist at Capital Economics.
The research firm said it expects housing starts to remain subdued for several more years due to weak demand and excess supply. "We doubt that housing starts will reach 1 million before 2015," Dales said.
Economists consider an annual rate of about 1 million necessary to keep pace with population growth and to replace existing stock.
Still, September's activity outpaced expectations by a wide margin. Economists surveyed by Dow Jones Newswires said they expected housing starts to fall 4.2%, to 573,000, largely because a weak job market has kept many would-be buyers on the sidelines. Economists had forecast a 1.2% rise in permits.
New-home construction this year peaked in April but fell sharply with the expiration of tax incentives for first-time purchases.