by Caitlin Kenney

Housing starts fell 10.6 percent last month, following months of gains. The Commerce Department says building permits also tumbled, 4 percent in October, economists had expected a 0.9 percent rise. After hitting a low of 479,000 in April, housing starts began to spring back in June but the last five months they have moved virtually sideways.

The folks over at Calculated Risk credit the low starts to high vacancy rates for owner occupied and rental housing:

It is very unlikely that there will be a strong rebound in housing starts with a record number of vacant housing units.

The vacancy rate has continued to climb even after housing starts fell off a cliff. Initially this was because of a significant number of completions. Also some hidden inventory (like some 2nd homes) have become available for sale or for rent, and lately some households have probably doubled up because of tough economic times.

Year over year, housing starts for October were down 30.7 percent from October 2008. Congress recently extended the $8,000 credit for first-time home buyers in an effort to help the struggling housing market. It's been extended through April of this year.

 

The consumer price index rose 0.3 percent last month, supporting the Federal Reserve's theory that inflation will remain subdued. The Wall Street Journal (subs req'd) reports:

In his first official speech since the Fed voted Nov. 4 to hold its key interest rate at a record low, Mr. Bernanke Monday said the central bank expects to keep its fed-funds target rate close to zero for an "extended period" in the face of high unemployment and low inflation.

The Fed chief also repeated that core inflation, inflation expectations and unemployment will guide the central bank's decisions on interest rates.

"On net, notwithstanding significant crosscurrents, inflation seems likely to remain subdued for some time," Mr. Bernanke said.

Food prices rose 0.1 percent last month, energy prices rose by 1.5 percent.