U.S. housing starts in October fell to a seven-month low as single-family home construction in the South tumbled, but a surge in building permits suggested the housing market remained on solid ground.
Groundbreaking dropped 11 percent to a seasonally adjusted annual pace of 1.06 million units, the lowest level since March, the Commerce Department said on Wednesday. September’s starts were revised down to a 1.19 million-unit pace from 1.21 million units.
Still, October marked the seventh straight month that starts remained above 1 million units, the longest stretch since 2007. That suggested a sustainable housing market recovery.
Rapidly rising household formation, mostly driven by young adults leaving their parental homes and a strengthening labor market, is supporting the housing sector.
Although residential construction accounts for just over 3 percent of gross domestic product, housing has a broader reach in the economy, with rising home prices boosting household wealth and, as a result, supporting consumer spending.
Housing has contributed to GDP growth in each of the last six quarters and is absorbing some of the slack from a weak manufacturing sector.
Economists polled by Reuters had forecast housing starts falling to a 1.16 million-unit pace last month.
Groundbreaking on single-family home projects, the largest segment of the market, fell 2.4 percent to a 722,000-unit pace. Single-family starts tumbled 6.9 percent in the South, where most home building takes place. Single family starts, however, rose in the Northeast, the Midwest and the West.
Starts for the volatile multi-family segment plunged 25.1 percent to a 338,000-unit pace.
Building permits increased 4.1 percent to a 1.15 million-unit rate last month. Single-family building permits rose 2.4 percent last month to their highest level since December 2007. Single-family permits in the South also hit their highest level since December 2007.
Multi-family building permits increased 6.8 percent.