WASHINGTON — Housing construction plunged 8.2% in October, the biggest decline in more than three years, the government reported Wednesday.
Analysts blamed the setback on rising mortgage rates and fears over last month's collapse of the stock market.
The Commerce Department said new homes and apartments were started at a seasonally adjusted annual rate of 1.51 million units in October, down from an annual rate of 1.65 million units in September.
The October figure represented the slowest annual building rate since April, 1983, and the decline from September was the steepest monthly drop since an 8.4% decrease in August, 1984. Housing construction had risen 4.0% in September.
Housing industry analysts blamed the largest part of the October drop on a steep jump in mortgage rates during September and October, but many said the 508-point fall in the Dow Jones industrial stock average on Oct. 19 had shaken builders' confidence about their ability to sell new homes.
"We are seeing the combined effects of what had been sharply rising interest rates and the impact of the stock market collapse," said Warren Lasko, executive vice president of the Mortgage Bankers Assn.
Michael Carliner, senior economist with the National Assn. of Home Builders, said a significant number of builders responding to the association's monthly survey taken after the stock collapse said they believed that it would hurt sales, particularly in the market for more expensive homes.
"Some builders are reporting the stock market decline has already had an adverse impact on sales and they expect it will have a bigger impact over the next six months," Carliner said.
But not all economists were pessimistic. They noted that mortgage rates have fallen by almost a full percentage point since mid-October and said this decline could spur sales.
"The decline in rates since the market collapse will certainly help the single-family sector," said James Christian, chief economist for the U.S. League of Savings Institutions. "I see the stock market decline as positive because it pushed interest rates lower."
Every region of the country except the Northeast suffered a drop in construction starts last month. The biggest decline was a 19.3% drop in building activity in the Midwest, which pushed starts down to an annual rate of 238,000 units. Housing starts fell 10.9% in the South to an annual rate of 615,000 units and dipped 1.2% in the West to an annual rate of 414,000 units.
The Northeast edged up 0.8% to an annual rate of 246,000 units.