New-home building declined more than projected in October, led by a slump in apartment construction and showing fitful progress in residential real estate.
Residential starts dropped 11 percent to a 1.06 million annualized rate, the slowest since March, from a revised 1.19 million pace the prior month, a Commerce Department report showed Wednesday. The median forecast in a Bloomberg survey called for 1.16 million. The most construction permits for single-family homes since 2007 indicates ground-breaking will rebound in coming months.
The figures suggest the real-estate market is settling into a more sustainable pace, fueled by persistent job growth and cheap borrowing costs. A labor market that begins to drive faster wage growth would help provide additional impetus for home sales, contributing more to the economy.
The decrease last month shows residential construction “that’s more consistent and more sustainable,” Millan Mulraine, deputy head of U.S. research and strategy at TD Securities LLC in New York, said before the report. “Underlying fundamentals remain favorable, and much of it has to do with the buoyancy in the labor market.”
Estimates for starts in the Bloomberg survey ranged from 1.06 million to 1.25 million after a previously reported September pace of 1.21 million.
Permits, a proxy of future construction, increased 4.1 percent to a 1.15 million annualized rate. They were led by an increase in applications for single-family homes, which climbed to a 711,000 pace, the strongest since December 2007.
The drop in starts last month was primarily due to a 25.1 percent slump in work on multifamily homes, the biggest drop since August 2014. Data on these projects, which have led housing starts in recent years, tend to be volatile.