Homebuilders started construction on fewer new homes in October, defying expectations that rising real estate prices would amp up construction.
Housing starts, which measure the start of construction of a new home, fell to a seasonally adjusted annualized rate of 1.52 million last month, Census Bureau data showed Wednesday. September’s starts were revised down 1.53 million from the preliminary estimate of 1.55 million.
The October starts were 0.7 percent lower than September and only 0.4 percent above the year ago level.
Single-family starts, where the housing market has been the hottest, were even more sluggish. The rate fell to 1.039 million, a 3.9 percent contraction from the 1.081 million in September.
Builders may be slowing construction because of shortages of materials and labor. Although the extreme rise in lumber prices seen this spring and summer has retreated, prices of many building materials remain high and firms across the economy say hiring workers is difficult.
In a sign that builders remain optimistic about the housing market, permit applications for new construction jumped four percent to an annual rate of 1.65 million and single family permits rose 2.7 percent to 1.069 million. An index of homebuilder sentiment published Tuesday showed an unexpected improvement in confidence in October.