The U.S. Commerce Department reported Friday building activity across the nation dropped 1 percent in October. It marked the seventh straight month of decline in construction activity and was significantly worse than September's 0.8 percent decline.

October's construction results also represented the biggest decline nationally since a similar 1 percent drop in September 2001, when the country was hit by the terrorist attacks while in the midst of recession.

Utah's booming economy, though, continues to generate demand for new homes while the commercial construction sector is helping to "turbo charge" the state's growth, said Mark Knold, chief economist at the Utah Department of Workforce Services.

"So far this year home building is down a bit but that is understandable, given that we're coming off a record year in 2005," Knold said. "There's still a lot of commercial construction projects under way, with more on the table; and the [LDS] church hasn't even really started yet on their big development."

The Commerce Department's report served to underscore the significant reversal in the housing industry nationally, which had been one of the economy's standout performers as the lowest mortgage rates in four decades pushed sales to record highs for five straight years.

Demand nationally has cooled this year as buyers balked at the huge run-up in prices in recent years. Builders have been offering a host of incentives from kitchen upgrades to free swimming pools to move what is now a record backlog of unsold homes.

There is no such backlog in Utah, though.

Eric Allen of Metrostudy, which collects and analyzes Utah home-building data, said currently along the Wasatch there is only a 1.3 month supply of finished and vacant new homes on the market.

"It's a real low number," Allen said, noting he expects that figure to go up bit in the coming months, but only because there is usually a flurry of activity this time of year as builders rush to finish the homes they are still working on before bad weather sets in.

James Wood, director of the Bureau of Economic and Business Research at the University of Utah, said single family home construction permits through October were down 2.8 percent, or about 500 units from 2005.

Yet in Washington County alone - which saw a flurry of construction activity but now appears to have fallen off because of overbuilding - there was a decline of more than 1,000 residential unit permits.

"We may be down a bit from last year, but 2006 still will be the second best year ever for home building in the state," Wood said.

The long-term prospects for Utah's home building industry appears bright as well.

Knold at the Utah Department of Workforce Services noted that 20- to 30-year-old Utahns are the state's second largest population group, behind only those 10 years old and younger.

"And over the next decade many of those 20- to 30-year-olds will be getting married, starting their families and wanting to buy their own homes," he said.

steve@sltrib.com

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* The Associated Press contributed to this report.