Housing starts decreased 3.1% last month to a 1.31 million annualized rate, reflecting a steep decline in the South, according to government data released Tuesday.

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Construction activity in the South, which makes up the largest share of homebuilding in the country, slumped 8.8% as the region's builders put off projects in the wake of hurricanes Helene and Milton. Housing starts have struggled to gain traction this year against a backdrop of a growing number of new homes for sale and mortgage rates near 7%.

While construction of single-family homes had picked up recently, builders are using incentives to boost sales as the market awaits a decline in borrowing costs that may be slow to emerge.

Economists are projecting only a modest decline in borrowing costs next year. The 30-year fixed-rate mortgage rate rose to 6.86% earlier this month after falling to a two-year low in late September, according to the Mortgage Bankers Association. In its latest forecast, the bankers group only sees rates falling to 5.9% by the end of next year.

Some builders, including DR Horton Inc. in its late-October earnings call, said the lead-up to the presidential election was creating uncertainty and keeping would-be buyers at bay.

New single-family home construction fell 6.9% to a 970,000 annualized rate in October. Multifamily housing starts increased 9.6%, the first gain in three months.

Construction Permits

Building permits, a proxy for future construction, eased 0.6% to a 1.42 million annualized rate. Permit authorizations for single-family home construction ticked up to the fastest pace since April.

Residential construction subtracted from economic growth in the second and third quarter. Before the October starts data, the Federal Reserve Bank of Atlanta's GDPNow forecast penciled in a slight subtraction in fourth quarter.

In addition to the drop in the South, starts in the Northeast slumped nearly 33% to the slowest pace since May. In the West, new construction jumped to the highest level since the start of the year.

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The government report Tuesday showed completions of new single-family homes decreased to a 986,000 annual pace, the weakest since March and reflected steep drops in the West and South.

The number of projects under construction slipped nearly 2% to a 1.47 million annualized rate, the lowest in three years.