The numbers: Construction of new U.S. homes fell 3.1% in October as builders pulled back on new projects.

Housing starts fell to a 1.31 million annual pace from 1.35 million the previous month, the government said Tuesday.

That’s how many houses would be built over an entire year if construction takes place at the same rate every month as in October.

Housing starts are now at the lowest level since July.

The data fell short of what Wall Street was expecting, which was a 1.34 million pace. All numbers are seasonally adjusted.

New-home construction is down 4% from a year ago.

The overall figure was dragged down by a drop in single-family construction. Multi-family home construction grew nearly 10% in October.

Building permits, a sign of future construction, fell 0.6% to a 1.42 million rate.

Key details: Mortgage rates began their climb to 7% in October, which prompted home builders to pull back on the construction of new single-family homes. That drop in single-family starts dragged down the overall figure.

The 30-year rate went from 6.12% as of Oct. 3 to 6.72% on Oct. 31, according to Freddie Mac data. Higher interest rates increase borrowing costs for home buyers, which saps demand.

As a result, single-family construction fell 6.9% in October from the month before. Multi-family construction, on the other hand, rose 9.8%.

The pace of construction was uneven across the U.S. Home construction rose in the West, up about 21%, and in the Midwest, where it was up 9%. But starts fell in the Northeast by 33% and in the South by 9%.

Permits, which provide an indication of future home-building activity, were also down in October. Permits applied for by builders to construct single-family homes inched up 0.5%, while permits to build multi-family homes dropped by 3%.

Big picture: Housing starts are typically a volatile data series. Nonetheless, the data indicates that as mortgage rates rose substantially in October, builders pulled back on starting work on new single-family homes.

Hurricanes also likely played a role in suppressing construction activity. Hurricanes Helene and Milton likely impacted builders, pushing construction down in the South in particular.

But builders are optimistic about the months ahead, driven by expectations of lower mortgage rates and regulatory relief with a second Trump administration.

In an industry survey on Monday, sentiment among builders was noted to be at a seven-month high. Builders expressed confidence in their ability to sell newly built homes.

What are they saying? “The decline in housing starts in October was exactly as we had expected given the hit to construction in the South from Hurricane Milton and should partially reverse in November,” Bradley Saunders, an economist focused on North America at Capital Economics, wrote in a note.

“Beyond this, we think the recent rebound in new sales and rising homebuilder confidence will help [housing] starts to rise to a peak of 1.08 million [annualized] in the second half of 2025,” he added.