New U.S. home construction fell unexpectedly in October, but a surge in future building plans suggested a wobbly housing recovery found firmer footing.
Building permits, a gauge of future construction, hit a six-year high last month, climbing 4.8% from September to a seasonally adjusted annual rate of 1,080,000.
Single-family permits rose 1.4%, while permits for multi-family buildings surged 10%, the Commerce Department said Wednesday.
New home construction dropped 2.8% from an upwardly revised September figure. But most analysts said the unexpected decline wasn’t cause for concern.
The drop-off came from apartment and condo construction, which often surges one month only to plummet the next. Single family-housing starts rose 4.2%.
“This is a welcoming sign as single-family starts are a better barometer of the underlying trend,” Xiao Cui, an economist with Credit Suisse, said in a research note.
IHS Global Insight economists Patrick Newport and Stephanie Karol called Wednesday’s Commerce data a “decent report.”
But they noted that the new home market faces several challenges, including limited supply and the low rate at which Americans are forming new households.
“The new home market has a lot of catch-up to do—a difficult feat to accomplish while wage inflation remains stubbornly low,” they said in a statement.
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