WASHINGTON -- Applications for home building permits, a key gauge of future construction, fell in September by the largest amount in five months -- a discouraging sign for the housing industry. A rebound in housing is needed to support a broader economic recovery.

Representatives of the industry told a congressional panel Tuesday that the $8,000 tax credit for first-time buyers needs to be extended and expanded to ensure the housing sector will emerge from the recession.

But the Obama administration, facing soaring budget deficits, has not decided whether to support any extension. And some private economists played down the impact of such a move, arguing that most interested buyers already had taken advantage of the tax break.

Meanwhile, the Labor Department said wholesale prices fell 0.6 percent last month on a drop in energy costs. Outside of food and energy, core inflation edged down 0.1 percent. In the 12 months ending in September, core wholesale prices rose a modest 1.8 percent.

The Commerce Department said construction of 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, the second setback in the past three months and the biggest decline since a 2.5 percent drop in April. It likely means construction will weaken a bit in coming months, partly because builders had accelerated projects to complete them before the tax credit expires Nov. 30.

Real estate agents and home builders are lobbying Congress to extend the tax credit, arguing government support remains critical.

At a hearing Tuesday before the Senate Banking Committee, 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 committee chairman Christopher Dodd, D-Conn., want to extend the credit until June 30 and to drop the requirement that the credit be available only to first-time buyers at an estimated cost of $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.

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