(Bloomberg) -- New U.S. home construction unexpectedly slowed down in October, driven by a drop in single-family projects, as supply-chain disruptions increased costs.

Residential starts fell 0.7% last month to a 1.52 million annualized rate after a downwardly revised 1.53 million pace in September, according to government data released Wednesday. The median estimate in a Bloomberg survey called for a 1.58 million pace.

Applications to build, a proxy for future construction, rose to an annualized 1.65 million units in October.

The data suggest builders are still struggling to break ground on new projects amid ongoing labor shortages and high materials costs. Meanwhile, demand is far outstripping supply, keeping home prices elevated and restricting some buying activity.

Builders are optimistic that conditions will improve as demand holds strong. A measure of homebuilder sentiment rose to a six-month high in November on stronger sales and foot traffic, according to a separate report out Tuesday.

Single-family starts fell 3.9% in October to an annualized pace of 1.04 million units as multifamily starts -- which tend to be volatile and include apartment buildings and condominiums -- increased 7.1% to 481,000. 

Meanwhile, the report suggests builders are falling behind on overdue projects. While starting construction on single-family homes fell, permits to break ground rose, producing the greatest backlog since 2006.

The number of single-family homes authorized for construction but not yet started -- a measure of backlogs -- climbed to 152,000 in October.

The report also showed the number of homes under construction but not yet completed rose to 1.45 million, the highest since 1974. The number of houses that remain under construction exceeded the number of those completed for the fifth straight month and by the most on record as delays persist.

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