Groundbreaking for single-family homes, which account for more than two-thirds of the housing market, increased 4.2% to a seasonally adjusted annual 696,000 unit pace, the highest level since November 2013. Multifamily starts dropped 15.4% to 313,000 in October after jumping 14.9% to 370,000 in September.
The plunge caused overall housing starts to fall 2.8% to a seasonally adjusted annual rate of 1.009 million in October from the revised September estimate of 1.038 million. Economists had previously predicted housing starts would climb to an annual rate of 1.025 million from the 1.017 million originally reported in September.
The report also showed building permits, an indicator of future housing demand, jumped 4.8% to an annual rate of 1.080 million in October from the revised September rate of 1.031 million.
Single-family starts in the South, where more than half of housing construction occurs, increased to its highest level since 2008.
Yesterday, the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), reported homebuilder confidence in the market for newly built single-family homes rose four points in November to a level of 58. That's the second-highest level since 2005, according to data from NAHB.
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Released this morning, the Commerce Department's October report shows U.S. single-family housing starts and building permits reached record levels last month, signaling the housing market is still on the road to recovery. Meanwhile, multifamily housing starts experienced a steep drop, hitting its lowest level since September 2013.