[ForexNews]

Housing starts plunged 10.6% m/m, to 529,000, in October, considerably below consensus (600,000) forecasts. This pushed starts to the lowest level since April. The weakness was particularly acute for multi-family starts, which tumbled 35%, to a new record low of 53,000. In addition, multi-family permits declined 17.9%, suggesting a further contraction ahead. However, given that starts of multi-family homes are already running at an annualized pace of 53,000, there is likely not much more downside even possible. Single-family starts declined 6.8%, to 476,000, reversing the 6.2% gain in September. As such, on a three-month moving average, single-family starts have been roughly unchanged since August after turning decisively higher over the first half of the year. Analysts interpret this to be a temporary pause as builders assess demand for new homes and remain cautious during the early stages of recovery. Starts of single-family homes built for sale are still running below the pace of sales, implying inventory will continue to contract from already lean levels. As such, this suggests that builders will need to increase construction even to meet the low level of demand. The recovery in the residential construction market is underwa, but it is likely to be bumpy.