Housing starts jumped 7% in September compared with August to a seasonally adjusted annual rate of 1.358 million, according to estimates from the U.S. Census Bureau and U.S. Department of Housing and Urban Development.
However, total residential production was down 7.2% compared with September 2022.
Starts of single‐family homes in September were at a rate of 963,000, an increase of 3.2% compared with August.
Starts of multifamily properties (five units or more per building) were at a rate of 383,000, an increase of 17.1% compared with the previous month.
Building permits in September were at a seasonally adjusted annual rate of 1.473 million, down 4.4% compared with August and down 7.2% compared with September 2022.
Permits for detached single‐family homes were at a rate of 965,000, an increase of 1.8% compared with the previous month, while permits for multifamily dwellings were at a rate of 459,000, down 14%.
Housing completions were at an annual rate of 1.453 million, an increase of 6.6% compared with August and 1.0% above September 2022.
In a statement, Alicia Huey, chairman of the National Association of Home Builders (NAHB), says the increase in single-family production in September was “somewhat unexpected as our latest builder surveys indicate that starts are likely to weaken in the months ahead due to recent higher mortgage rates that were near 7.6 percent in mid-October.”
“Meanwhile, builders also continue to face persistent labor shortages, a lack of buildable lots and higher financing costs for acquisition and development loans,” Huey says.
“Despite ongoing challenges in the market, the housing deficit of resale inventory continues to provide some market support for builders,” adds Robert Dietz, chief economist for NAHB. “Because of a lack of existing homes in the marketplace, 31 percent of homes available for sale in August were new construction. This compares with a historical average in the 12-14 percent range.
“But in another sign that higher interest rates have slowed the market, the number of single-family homes under construction in September was 674,000, which is almost 15 percent lower than a year ago,” Dietz adds.
Odeta Kushi, deputy chief economist for First American, says when looking at the September increase, “context is key.”
“Last month’s big dip means the bar was low for monthly growth,” Kushi says in a statement. “Builders are generally feeling more pessimistic. Builder sentiment dipped for the third consecutive month in October to the lowest level since January 2023. Of the index’s three components, present sales conditions fell 4 points, sales expectations in the next six months dropped 5 points, and prospective buyer traffic dropped 4 points.”
“Mortgage rates continued to climb in October and have remained above 7 percent since mid-August,” Kushi says. “Higher rates, all else held equal, dampen affordability and price out potential buyers, particularly rate-sensitive first-time home buyers. Higher interest rates also increase the cost of builder development and construction loans.”
Kushi says the recent drop in builder sentiment “is concerning because the U.S. housing market faces a structural housing shortage.”
“Demographic tailwinds from millennials continuing to age into their prime home-buying years and a lack of existing-home inventory mean that new home construction is essential in meeting shelter demand,” she says.
On the flip side, “higher single-family permits are a sign of cautious optimism.”
“Builders have benefitted from the lack of resale inventory and from their ability to use incentives, such as mortgage rate buydowns to entice buyers off the sidelines,” Kushi says. “Builders have a huge competitive advantage over the resale market in this way.”
Photo: Annie Gray