- U.S. housing starts fell 0.5% in September to an annualized rate of 1.35M, driven by a 9.4% decline in multifamily projects.
- Single-family home starts increased by 2.7% to 1.03M, the highest rate in five months, indicating renewed activity in that sector.
- Building permits, a measure of future construction, declined by 2.9%, reflecting ongoing challenges in the housing market amid high mortgage rates.
- Regional variations showed growth in single-family starts in the South and Northeast, while other regions saw weaker performance.
According to recent government data, U.S. housing starts slipped slightly in September, down 0.5% to a seasonally adjusted annual rate of 1.35M, as reported by Bloomberg.
This dip was due mostly to a sharp drop in multifamily construction, which outpaced the modest gains seen in single-family projects. The slowdown highlights ongoing challenges in the housing sector, including high mortgage rates and economic uncertainty.
Single-Family vs. Multifamily
Single-family home starts rose 2.7% in September to an annualized rate of 1.03M units, the highest level in five months.
This uptick suggests a slight recovery, although overall housing activity remains below the peak levels seen during the late 2021 to early 2022 housing boom, when mortgage rates were historically low.
However, the gain in single-family starts was offset by a 9.4% drop in multifamily construction, which fell to a four-month low. This segment, which includes apartments and condos, has been particularly sensitive to recent economic pressures and rising borrowing costs.
Signs of a Slowdown
Building permits, a proxy for future construction activity, fell by 2.9% in September to an annualized rate of 1.43M.
While permits for single-family homes inched up slightly by 0.3% to 970K, the broader decline signals potential challenges ahead for the housing market, particularly if economic conditions do not improve soon.
Regional trends in September also showed a mixed picture for single-family housing starts. In the South, starts rose by 6.6%, reaching a five-month high. Meanwhile, in the Northeast, starts shot up by 10.6%, marking the strongest regional growth. Performance was weaker in other regions, reflecting varying local conditions.
The September report also revealed fewer single-family home completions, which were down 5.7% to an annual pace of 1.68M. Additionally, the number of projects under construction dipped by nearly 2%, reaching an almost three-year low.
This signals a contraction in the construction pipeline, reflecting ongoing economic uncertainty and cautious behavior among developers.
Economic Outlook
The cooling in housing starts follows a period of elevated mortgage rates, which reached two-year highs before deflating slightly in mid-September.
The Federal Reserve’s recent decision to cut interest rates by 50 bps has also sparked cautious optimism among homebuilders, who anticipate cheaper financing could spur demand for new homes.
Industry leaders, including KB Home CEO Jeffrey Mezger, have expressed hope that lower borrowing costs will encourage more activity in the resale market, creating a “housing food chain” that will boost demand for new construction.
However, analysts like Sal Guatieri, a senior economist at BMO Capital Markets, warn that a sustained housing recovery may still be a ways off. According to Guatieri, significant improvements in affordability will likely only come once the Fed enters a more extended easing cycle.
