WASHINGTON - Apartment construction plunged sharply in October, as the pace of homebuilding slipped amid a broader cooling of the real estate market.
Housing starts -- both houses and apartments -- fell 11 percent last month to a seasonally adjusted annual rate of 1.06 million homes, the Commerce Department said Wednesday.
Single-family house construction declined, but October's drop mostly stemmed from a 25.5 percent slide in the volatile multifamily category that includes apartments.
The slowdown comes after a steady year of gains. Home construction has climbed a solid 10 percent year-to-date as strong hiring has improved consumer confidence and encouraged more people to buy houses or move to new apartment complexes.
But the market's upward trajectory shows signs of stalling as rising home prices, tight inventories and the economic uncertainty reflected in the stock market have sidelined many would-be buyers.
Still, building permits rose 4.1 percent in October to an annual rate of 1.15 million. That's a sign that apartment construction, which accounted for the majority of the increase in new permits, could soon rebound as a growing share of the country turns to renting.
Nearly 33 percent of buildings completed so far this year were apartment complexes and condo towers, compared to just 27 percent before the start of the recession in late 2007. The recovery from that economic downturn over the past six years has reshaped the housing market as those who lost their homes to foreclosures and recent college graduates have moved into rental properties.
The percentage of Americans who own homes has fallen to nearly a 48-year low of 63.7 percent.
And the increase in home sales enjoyed this year appears unsustainable without significant income growth. Relatively low supplies of homes on the markets have pushed prices upward, straining down payments savings.
Sales of existing homes jumped 4.7 percent last month to a seasonally adjusted annual rate of 5.55 million, the National Association of Realtors said last month.
The housing market contains 4.8 months' supply of homes, significantly lower than the six months associated with a normal market.
Tight inventories have fueled rising home values. The median home sales price was $221,900 in September, a 6.1 percent annual increase.
Still, an index of pending home sales slipped in September, and builders are slightly less optimistic about future sales. The National Association of Home Builders/Wells Fargo builder sentiment index released Tuesday slipped in November to 62, down three points from a revised reading of 65 in October.
Readings above 50 indicate more builders view sales conditions as good, rather than poor. The index has been consistently above 50 since July last year.