October saw another drop in residential construction, with privately owned housing starts sinking to a seasonally adjusted annual rate of 1.43 million units, according to the newest numbers from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.

That pace was down 4.2% monthly and 8.8% annually, cooled by the ongoing run-up in interest rates as the Federal Reserve continues to deploy aggressive tactics to rein in inflation. Single-family construction activity, in particular, has seen a steep pullback. October single-family starts came in at a rate of 855,000 units, down 6.1% monthly and 20.8% yearly. October’s pace of starts was the lowest level since May 2020, when lockdowns and other COVID-19 countermeasures ground construction to a halt.

Single-family completions, meanwhile, fell by 8.3% from September — the sharpest monthly decrease since January 2022. This potentially signaled that, with material inputs still expensive and home purchase demand diminishing, builders could be responding by canceling projects.

“Mirroring ongoing falloffs in builder sentiment, builders are slowing construction as demand retreats due to high mortgage rates, stubbornly elevated construction costs and declines for housing affordability,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB).

“This will be the first year since 2011 to post a calendar year decline for single-family starts,” said Robert Dietz, NAHB chief economist. “We are forecasting additional declines for single-family construction in 2023, which means economic slowing will expand from the residential construction market into the rest of the economy.”

Multifamily construction has shown a bit more resilience, with starts backtracking by only 1.2% in October. This sector, like single-family, is being strained by the growing cost of mortgage capital, but it is buoyed somewhat by affordability woes that keep would-be homebuyers in the renter pool.

In fact, the number of multifamily units under construction in October rose to 928,000, the highest level since December 1973. And even with the monthly retreat, multifamily starts were at an annualized pace of 570,000 units, 17.8% above the mark seen in October 2021. Demand for new apartments is running “considerably slower” compared to last year’s pace, Wells Fargo economists noted, meriting observation as this thaw could lead developers to slow construction activities.