Housing starts fell more than expected in August as groundbreaking for both single-family and multi-family units declined, while permits for future construction rose, a government report showed on Tuesday.

KEY POINTS: * The Commerce Department said housing starts decreased the most since April, down 5.0 percent to a seasonally adjusted annual rate of 571,000 units. * July's starts were revised down to a 601,000 unit pace, which was previously reported as a 604,000 unit rate. * Economists polled by Reuters had forecast housing starts to fall to a 590,000-unit rate in August. * An overhang of previously owned homes on the market has left builders with little appetite to break ground on new projects and is frustrating the economy's recovery from the 2007-09 recession. * Housing starts are at less than a third of their peak during the housing boom.

COMMENTS:

SCOTT BROWN, CHIEF ECONOMIST, RAYMOND JAMES, ST. PETERSBURG,

FLORIDA:

It's kind of a mixed bag. The sense is that housing is still pretty weak. It won't improve until the labor market improves substantially and that doesn't look like that would happen this year. Housing is still bouncing around the bottom here even though mortgage rates are so low.

SAL CATRINI, MANAGING DIRECTOR, EQUITIES, CANTOR FITZGERALD &

CO, NEW YORK:

They missed and revised down. It's bad that the housing market is not only bad, but still missing low expectations. Obviously the market has been ignoring bad news and has been rallying. We were oversold and this is a continuation of what we've seen over the past week.

MARKET REACTION: STOCKS: U.S. stock index futures hold gains BONDS: U.S. bond prices hold losses FOREX: The dollar holds slight losses versus euro

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