Here’s more proof that even though the economy is starting to show signs of growth, it still has a long way to go: residential construction continues to reflect a downward movement and building permits increase only by a minimal. The drop can be greatly attributed to multi-family starts and the movement in the West.

The Commerce Department released a report on Wednesday showing figures for housing starts and building permits grants for the month of October. The month reflected an 11.7% fall to an annual rate of 519,000 – more than what is expected. The fall is in comparison to the revised September estimate of 588,000. The annual rate is expected by economists to slip from the 610,000 originally reported in the previous month to 600,000. ING’s chief international economist Rob Carnell, however, says the overall figures may seem to reflect a bad result but reality shows that the decline is more centered on the erratic nature of the multi-family sector.

In October, multi-family housing starts fell by 47.5% to an annual rate of 74,000. This is a huge number as compared to single-family starts’ decline of 1.1% to an annual rate of 436,000.

The bigger-than-expected drop in housing starts can also be pinned to West’s figures, showing a 30.5% decline in starts; the South also had a drop of 13.4%. Northeast and Midwest regions, on the other hand, enjoyed a modest increase in starts. Northeast had a 13.4% increase and Midwest 1.0%.

Building permits, indicator of incoming housing demand, are enjoying better news as the Commerce Department report a 0.5% growth to an annual rate of 550,000 in October. This is from the revised September rate of 547,000. The number, though, is lower than what economists projected – a rise to an annual rate of 570,000.

“Housing permits were stable in October, with little change in single- or multi-family filings, suggesting the drop in starts was a fluke likely to reverse next month. Even if it does, however, we do not look for starts to make a material economic contribution at all next year as there is still an enormous overhang of existing supply to work through before new construction makes much sense in most of the country,” says FTN Financial’s chief economist Chris Low.