Housing starts fell 11.4% in October to their lowest level in six months, the Census Bureau said. But the falloff in new construction is unlikely to raise too much concern about the sector.

New construction on private homes fell to an annualized pace of 1.603 million in October from a rate of 1.810 million in September, when it was at its best level since 1986. In a positive sign, however, building permits were up to 1.763 million in October from 1.733 in September.

"There is still a lot of underlying momentum in the housing market," said Christopher Low, chief economist at First Tennessee Capital Markets. "The decline in October probably has more to do with the cold snap in the first half of the month than it does with anything else."

The housing market has been a pillar of strength for the economy throughout the latest downturn. With 30-year mortgage rates dropping to record lows -- they're now at 5.94% -- demand for new housing has soared. Most recently, the Mortgage Bankers Association of America said its index of loan applications for purchases and refinancings was up 21% in the week ending Nov. 15.

Among homebuilders,

Hovnanian

(HOV) - Get Report

said Wednesday that it expects to exceed its 2002 earnings guidance of between $4 and $4.10 a share.

Hovnanian said its recorded contracts were up 78% in the fourth quarter from year-ago levels. The homebuilder said it would provide an update to its 2003 projection of $4.50 to $4.75 a share on Dec. 9.

Shares of Hovnanian were lately down 8 cents, or 0.25%, at $31.62, while the Dow Jones Home Construction Index was recently trading lower 2.57 points, or 0.88%, to 290.99.