The U.S. housing industry continues to scale back its construction activities as demand for their products fails to rebound in the current economic crisis.

The Census Bureau reported this morning that housing starts in October fell by 38 percent from the same month a year ago to an annualized rate of 791,000 units, which represents the lowest estimate that Census has ever recorded since it began collecting such data in the 1940s. Single-family activity was off by 39.9 percent for a seasonally adjusted rate of 531,000 starts.

An estimated 59,600 building permits, a bellwether for future construction, were issued in October, which means that the annualized rate of permits was off by 40.7 percent year-over-year to 708,000, the lowest estimate since 1960. The subtotal of single-family permits fell 43.3 percent to 460,000. The single-family permit number for October was 14.5 percent below Census’ estimate for September, as clear an indication as any of how rapidly business conditions have deteriorated over the past two months. Yesterday, the NAHB said that its Housing Market Index, an indicator of home builders' confidence in the housing market, fell to a reading of 9 in October.

October’s housing starts figure was roughly in line with economists’ gloomy projections. “Housing starts were a little better than expected, but unfortunately the expectations were so low, the bar was easy to cross,” Art Hogan, chief market strategist at Jefferies & Co., told CNN Money. “I don't think there's anybody in the free world who doesn't know we've got a problem with real estate.”

But the depth of the problem continues to concern industry watchers. “This report is a shocker,” adds Patrick Newport, U.S. economist for IHS Global Insight, a research firm in Lexington, Mass. What most concerns him is that, despite reductions in construction and new-home inventories, “these declines have hardly made a dent in the excess number of homes for sale. How can this be? The most likely explanation is that household formation has slowed significantly, as people losing their jobs or homes to foreclosures move in with relatives. This slowdown in household formation is one more obstacle that will prolong the downturn in housing starts.”

Census estimates that the steepest dip in housing starts in October occurred in the Northeast, which was down 51.6 percent from a year ago. The West saw housing starts decline by 39.1 percent, the Midwest by 38.2 percent, and the South by 33.9 percent.

There was one bit of good news today: the Labor Department reported that housing, which accounts for two-fifths of the consumer price index, remained unchanged from September to October.

John Caulfield is senior editor at BUILDER magazine.