The housing market is showing of further deterioration, with several key indicators plunging to record lows.

The Commerce Department said Wednesday construction starts dropped 4.5% in October from September, to 791,000 -- the lowest level since the government started keeping records in 1959. 

Permits to begin new construction also plunged, declining 12% in October to a record low of 708,000. Both measures are also off nearly 40% as compared with last year.  Economists generally view this number as being more significant than the number of starts since construction starts are often skewed by weather conditions. 

The data is dismal, and indicates consumers are cutting back on building new homes: “Right now, housing is a disaster area,” High Frequency Economics Chief U.S. Economist Ian Shepherdson wrote in a research note.

According to the Mortgage Bankers Association’s mortgage activity report, 30-year fixed rate mortgage interest rates were considerably higher on October than September, which could have led to some of the weakness. 

Also contributing to the decline, according to economists, could be dampening expectations of the future, which generally drive such long-term decisions.  That notion is corroborated by the fact that separate reports show consumer sentiment is depressed as compared with recent norms. 

Ultimately, this trend could prove damaging to already beleaguered home builders. The Homebuilders SPDR (XHB), which tracks a basket of publicly traded home builders, is off by 48% for the year, and 24% for the month.  

What is bad for home builders could prove to be a silver lining for the housing market. These numbers could mean the supply of homes could be stabilizing, since new homes are being built at a substantially slower pace than in previous months. If demand also stabilizes, or at least doesn’t rapidly fall, some pressures on home prices could ease.

“With construction at these levels, the inventory/sales ratio for new homes ought to drop quite quickly over the next few months, setting the scene for an eventual stabilization in prices,” Shepherdson wrote.