Housing Starts Fall in October
Housing construction lost momentum in October, plunging by 11.4%, the government reported Wednesday. It is the biggest drop since 1994.
Yet even with the sharp decline, which came after the level of housing construction shot up to a 16-year high in September, the number of housing units for which builders broke ground in October still is considered to be in the healthy zone.
Builders began work on 1.6 million housing units, at a seasonally adjusted annual rate, representing an 11.4% decline in October from the previous month, the Commerce Department reported.
While October’s housing activity level was weaker than analysts were expecting, economists predicted September’s red-hot pace could not be sustained. Housing construction jumped by 11% in September to a rate of 1.8 million units, the highest level since December 1986.
The drop in October marked the biggest decline since January 1994 and the number of units under construction was the lowest since April.
“The good news is that the level of housing activity is still very strong, but the bad news is housing construction is probably maxed out in terms of how much it will contribute to economic growth,” said Ken Mayland, president of ClearView Economics.
“The housing construction market is in good shape, but September was probably the high-water mark,” he added.
Wednesday’s report said construction of new single-family homes fell 7% in October to a rate of 1.35 million. Work on apartments, condominiums and other multifamily housing plummeted by 31.4% to a rate of 221,000 last month.
Even with the slowdown in construction in October, the housing market remains in good shape. Stoked by low mortgage rates, home sales are expected to post records this year.
The average rate on a 30-year fixed-rate mortgage dropped to 5.94% last week, the lowest level since mortgage giant Freddie Mac began tracking these rates in 1971.
In the Northeast, housing construction in October fell 18.8% from the previous month to a rate of 143,000. In the Midwest, construction dropped by 19.5% to a rate of 301,000. In the South, construction was down by 14.3% to a rate of 701,000.
But in the West, housing construction rose 3.6% to a rate of 458,000.
Housing permits, a good barometer of demand, rose 1.7% in October to a rate of 1.76 million, an encouraging sign, economists said.