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(Bloomberg)—New US home construction continued to decline in October as builders contend with a sharp retrenchment in housing demand.

Residential starts decreased 4.2% last month to a 1.43 million annualized rate after an upward revision to the prior month, according to government data released Thursday. Single-family homebuilding dropped to an annualized 855,000 rate, the lowest since May 2020.

Applications to build, a proxy for future construction, fell to an annualized 1.53 million units. Permits for construction of one-family homes also dropped to the lowest since the early months of the pandemic.

The median estimates in a Bloomberg survey of economists called for a 1.41 million pace of residential starts and 1.51 million pace for total permits.

The housing market has so far borne the brunt of the Federal Reserve’s inflation fight, with rapid interest-rate hikes driving a surge in borrowing costs. High mortgage rates have crippled buyer demand, which in turn, has started to drive down home prices in many places.

Homebuilder sentiment has fallen every month this year, dropping in November to the lowest level in a decade outside the onset of the pandemic. And the pullback in demand has also led builders to increasingly cut prices and offer a variety of incentives to lure more buyers into the marketplace.

Both permits and starts for multi-family units eased slightly from the prior month.

Groundbreaking fell in three of four regions, with the South posting the only increase. Construction of single-family dwellings dropped nationwide.

Existing-home sales for October will be released Friday, followed by data on new-home purchases next week.

A separate report Thursday showed applications for US unemployment insurance unexpectedly fell slightly last week and remained near historic lows.

–With assistance from Jordan Yadoo.

© 2022 Bloomberg L.P.

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