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 percent from September to a seasonally adjusted annual rate of 1,080,000.
Single-family permits rose 1.4 percent, while permits for multi-family buildings surged 10 percent, the Commerce Department said Wednesday.
New-home construction dropped 2.8 percent 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 percent.
“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.