Economic Report: Housing starts slip in October as apartment construction slows

WASHINGTON (MarketWatch) A decline in construction started on apartments led to a slower pace of home building last month, according to government data released Wednesday.

Housing starts fell 2.8% in October to an annualized pace of 1.01 million from 1.04 million in September, the U.S. Commerce Department reported. The October starts rate in buildings with at least five units dropped 15.5%. Meanwhile, construction starts for single-family homes rose 4.2%, reaching the highest pace since November 2013.

Economists polled by MarketWatch had expected the overall starts rate to tick up to 1.03 million from an originally reported rate of 1.02 million in September.

Economists advised investors not to read too much into a single monthly home-construction report. A confidence interval of plus or minus 10% for Octobers overall starts drop of 2.8% shows that the government isnt sure whether the pace of construction rose or fell last month.

Longer-term trends signaled that the home-construction market continued to rebound: The pace of Octobers overall construction was up 7.8% from the year-earlier period.

All told, the report looks far more upbeat given positive revisions and favorable building permit issuance figures, said Michael Dolega, senior economist at TD Economics.

While we dont expect housing to improve at breakneck speed, we continue to feel positive about the prospects for housing market with a continued gradual recovery the most likely outcome. The pace of homebuilding remains well shy of demographic fundamentals. With mortgage rates likely to remain favorable, this gap should close over the medium term as the labor market heals, he added.

The annual pace of permits for new construction, a sign of future demand, rose 4.8% in October to 1.08 million the highest rate since June 2008 from 1.03 million in September. The permits rate rose 1.4% for single-family homes, and 8% for apartments.

Home building and sales have faced setbacks this year in the form of bad weather, rapid changes in interest rates and prices, and lending standards that some analysts say remain overly restrictive.

Wednesday afternoon, the Federal Reserve will release the minutes of its late October meeting, and officials there have been keeping a close watch on housing, trying to avoid disrupting the markets rebound. The central banks most recent policy statement said the housing sectors recovery remains slow.

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Economic Report: Housing starts slip in October as apartment construction slows