The FINANCIAL -- New-home construction sank in October, as builders dialed back construction of apartments and condominiums that drove demand through much of the summer, according to Nasdaq.
Housing starts fell 11% from a month earlier to a seasonally adjusted annual rate of 1.06 million in October, the Commerce Department said on November 18. Starts of single-family homes, which make up nearly two-thirds of the market, fell 2.4%. Construction of multifamily units, including apartments and condominiums, plunged 25.1%.
New applications for building permits, a bellwether for future home construction, rose 4.1% to a seasonally adjusted annual rate of 1.15 million. Single-family permits rose to their highest level since December 2007, and were up in every region but the Northeast.
Economists surveyed by The Wall Street Journal had expected October housing starts to reach a rate of 1.16 million, and building permits to hit a rate of 1.14 million.
Home construction figures can be volatile, and are typically revised. Wednesday's report showed new home starts increased 6.7% in September, up slightly from a previously reported 6.5% gain.
Wednesday's housing starts figures also came with a 13.5% margin of error.
The housing market has been building momentum this year after a lackluster performance in the early years of the recovery. Still, construction activity is well below its prerecession levels, which economists suggest may be holding back sales of new homes, constraining the supply of homes on the market and in turn pushing up prices.
New-home sales fell in September, and were weaker in August than previously estimated, the Commerce Department said in a separate report last month. But existing home sales climbed in September, and put the market back on pace for its best year since 2007, the National Association of Realtors said in October.
U.S. homebuilders also appear slightly less optimistic this month. The National Association of Homebuilders' confidence index slipped unexpectedly to 62, the group said Tuesday, down three points from its October reading but still near a 10-year high.
The relationship between the confidence index and actual construction activity "can be quite variable," in part because builder perceptions are subjective and change over time, said Jim O'Sullivan, chief U.S. economist for High Frequency Economics.
"Even so, the ups and downs in the index are indicative of momentum," Mr. O'Sullivan said in a note to clients Tuesday. "Momentum has been up."
Wednesday's report showed housing starts rose a seasonally adjusted 10.2% in the Northeast and 15% in the Midwest. Starts were down 18.6% in the South and 16.2% in the West.