Home construction in October fell 5.6 percent, the biggest dip since a 17.7 percent decline in March, and building permits, a sign of future activity, dropped by the largest percentage in six years, according to government data released yesterday.

The Commerce Department report was further evidence that rising mortgage rates and accelerating prices have begun to chill a market that has set records for four years. While some analysts said the numbers indicate that the boom has peaked, industry economists say that doesn't mean a collapse is imminent. They say the former pace was unsustainable, leading the Federal Reserve to try to tamp down the "froth" by raising short-term interest rates eight times in the past 16 months.

After shrugging off the Fed's increases for a time, mortgage rates have risen for the past nine weeks, with 30-year fixed-rate loans averaging 6.37 percent this week, up slightly from last week's average of 6.36 percent, according to Freddie Mac. A year ago, a 30-year loan averaged 5.89 percent.

Current mortgage rates though, are still below the 1990s average of about 8 percent for a 30-year loan and 6 percent for a one-year adjustable-rate mortgage, Freddie Mac chief economist Frank Nothaft said yesterday. Many industry experts, however, including those at the Fed, are worried that buyers are using risky loans to purchase homes they can't really afford. As those loans readjust to rising interest rates, homeowners may not be able to pay the higher amounts due and investors may dump properties.

At the current pace of building and sales of new homes, 2005 will still set records. But the month-to-month drop in housing starts was double analysts' forecasts. October starts fell to a seasonally adjusted annual rate of 2.01 million units, down from September's revised rate of 2.13 million and 2.3 percent below October 2004.

The slowdown occurred in both single-family housing and multi-family construction and occurred in all regions of the country. Susquehanna Financial Group home-building analyst Stephen East noted that monthly numbers are volatile, and said "single-family numbers are still showing solid year-over-year growth."

Building permits dropped 6.7 percent to an annual rate of 2.07 million units. It was the biggest slippage since September 1999.

"There is now accumulating evidence that the housing market peaked somewhere in the third quarter," said David Seiders, chief economist for the National Association of Home Builders. "Our survey of builder confidence, which came out yesterday, was down a lot. . . . It was the biggest drop since the first survey after 9/11."

Seiders said "builders are concerned about what's happened to affordability . . . about the interest rate structure moving up" and about how the prospect of high energy bills might dissuade potential buyers.

But "builders are probably worried more than they should be" about energy prices, he said. He sees "an orderly simmering-down process that probably will last through much of next year," with price appreciation slowing but not dropping.

Others see trouble ahead because of increased use of exotic purchase loans and the surge in home equity loans.

"This is a sign that we've finally started on the decline in the housing market," said Hilary Kramer, president of A&G Capital Group. Big builders "will be okay. They know what's coming down the pike," she said. "But what's happening in this cycle that will be unique is that the average American homeowner is overextended and the variable-rate mortgages are starting to kick in."

Workers put up second-story framing for new houses in Carlsbad, Calif., but nationally construction has fallen.