Home construction drops 2.8% in Oct.

Published: Wednesday, 11/19/2014 - Updated: 14 hours ago

ASSOCIATED PRESS

WASHINGTON Construction of new homes fell slightly in October after a big surge in the previous month, but the weakness was largely driven by the volatile apartment sector.

Builders started construction at a seasonally adjusted annual rate of 1.009 million last month, the Commerce Department reported today. That was a drop of 2.8 percent from September when construction had jumped 7.8 percent to 1.038 million.

The weakness stemmed from a 15.4 percent plunge in apartment construction, a category that tends to have big swings from month to month. Construction of single-family homes was up 4.2 percent, the third gain in the past four months.

Applications for building permits, a good sign of future activity, rose 4.8 percent in October to 1.08 million.

While overall construction was down in October, analysts said the weakness was confined to apartment building, which had seen a huge increase in September. They noted upward revisions to overall activity in September and August and forecast further gains in the months ahead.

The improving trend should continue, supported by generally low rates ... and strong job growth, said Jennifer Lee, senior economist at BMO Capital Markets.

Showing strength in October was the South, which posted a 10.1 percent jump on construction starts. All other regions of the country recorded declines. Construction fell 18.5 percent in the Midwest, 16.4 percent in the Northeast and 10.9 percent in the West.

Solid employment gains, lower mortgage rates and somewhat easier lending standards are likely to boost housing in coming months. At the same time, economists are concerned about price gains, which so far have been outpacing wage increases.

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Home construction drops 2.8% in Oct.