Nov. 21, 2005--The red-hot real estate market finally might be cooling down, according to Commerce Department statistics that show the number of new construction permits dropped faster in October than they have in six years.
Homebuilding permits in October fell 6.7% from the previous month, sliding to an annual rate of 2.071 million units, the department reported on Nov. 17. That's 1.1% below the same period last year, and the sharpest decline since dropping 7.2% in September 1999.
Permits for single-family homes were also down, by 4.9%, to 1.681 million, along with the number of housing starts, by 5.6% to 2.014 million -- the slowest pace since March and 2.3% below last year, the department said.
Housing completions were unchanged in October.
The supply of new homes for sale has been rising for well over a year, according to Ian Shepherdson, chief U.S. economist at High Frequency Economics, a New York-based market analysis firm. "Builders are now reacting by slowing the pace of new construction," he said in an email.
Shepherdson said he expects the rate of housing starts to consistently run lower than in recent years, though Gulf Coast rebuilding efforts after this summer's hurricanes would help soften the blow for the residential construction industry.
The impact of the storms had only a minimal effect on last month's data, the Commerce Department said. Downturns in October were reported in every region except the Midwest.