Home construction is starting to show some small signs of improvement this fall, the latest government statistics released Thursday show.

New construction of U.S. houses retreated only slightly in October after a strong gain in the previous month. Economists had been looking for a big retreat.

Housing starts dipped a slight 0.3 percent in October to a seasonally adjusted annual rate of 628,000 units, the Commerce Department said.

This was much a firmer level than the 605,000-unit level expected by Wall Street economists surveyed by MarketWatch.

Housing starts rose a revised 7.7 percent in September to 630,000 units. This is down from the initial estimate of a 15 percent gain to 658,000 units.

"The housing sector is a long way away from being healthy, but maybe it is starting to get strong enough to move out of the ICU to the recovery room," said Joel Naroff, president of Naroff Economic Advisors.

Starts of single-family homes rose 3.9 percent to a 430,000 rate in October. This followed a 2.6 percent drop in September.

Starts of multifamily units dropped 13.3 percent to 183,000 units. Multifamily starts jumped 37.9 percent in the previous month.

In the past year, starts are up 16.5 percent. Starts of single-family homes are off 0.9 percent, while starts of apartments and condos have surged 96.8 percent.

Another positive sign in the report came in a surge in building permits, a leading indicator of housing construction.

Permits surged 10.9 percent to a seasonally adjusted annual rate of 653,000 in October. This is the highest level of permits since March 2010.

Building permits for single-family homes rose 5.1 percent to a 434,000 rate. Many economists consider single-family permits to be the most important number in the government's release.

Permits for apartments and condos rose 29.5 percent to 202,000.

The Federal Reserve has been using all its tools to keep long-term interest rates low and help the housing market recover.

After purchasing more than $2 trillion in Treasurys and housing-related assets, the central bank has committed to keeping short-term rates near zero until mid-2013.

It has also begun to replace short-term securities on its balance sheet with longer-term issues to put further pressure on the long end of the yield curve.

Separately, a home-builder sentiment gauge released Wednesday rose in November to the highest level in about a year and a half.