Housing Starts Increase 12% in October

Housing starts rebounded 12% in October to their highest level in nearly three years, the government reported today.

The Commerce Department said new homes and apartments were built at a seasonally adjusted annual rate of 1.42 million units last month, up from a revised 1.27 million units in September. Starts had fallen 4.6% in September and 6.4% in August.

The October gain was the largest since a 13% advance in December, 1986.

September’s 1.27-million-unit pace was the most sluggish rate since new homes and apartments were being built at an annual rate of 1.17 million units in October, 1982, during the depths of the 1981-82 recession.

The housing construction industry has been one of the economic sectors slowed by high interest rates caused by the Federal Reserve’s grip on credit as it strives to cut inflation.

In addition to its effect on construction jobs and the building materials industries, the housing industry has an impact on other housing-related businesses such as home appliances and furnishings.

But fixed mortgage rates had fallen from their March peak of 11.22%, according to the Federal Home Loan Mortgage Corp., or Freddie Mac, and some analysts have been looking for an increase in construction. Freddie Mac said fixed rates stood at 9.82% at the end of October.

Economist Michael P. Niemira of Mitsubishi Bank in New York said builders seem less concerned by interest rates than the pace of new sales.