New US home construction rose in September, led by a pickup in multi-family groundbreakings.
(Bloomberg) — New US home construction rose in September, led by a pickup in multi-family groundbreakings.
Residential starts increased 7% last month after falling by the most in over a year in August, according to government data released Wednesday.
Multi-family dwellings rose more than 17% after also slumping the prior month.
Applications to build — a proxy for future construction — fell to 1.47 million. Permits to build one-family homes ticked up to the highest level since May 2022, while multi-family authorizations declined to the lowest in nearly three years.
While the increase partially offset a sizable drop in the prior month, the housing market as a whole remains depressed amid soaring mortgage rates and high prices that are driving affordability down to historically lows.
Read More: US Housing Affordability Worsens to New Record Low on High Rates
Though the high-rate environment had initially been beneficial to homebuilders — who saw prospective buyers flee to new construction amid limited resale supply — that’s starting to change.
The recent pickup in borrowing costs to the highest level in decades is now discouraging many buyers from house-hunting altogether.
As a result, homebuilder sentiment fell to a nine-month low in October as they grew more pessimistic on current and future sales.
What Bloomberg Economics Says…
“The drop in building permits and homebuilder sentiment shows how tight financing conditions are constraining the US housing market.
Still, the low inventory of existing homes means builders are better positioned to react to any demand.”
— Eliza Winger. To read the full note, click here
Housing starts rose in all regions except the Northeast, where groundbreakings sunk to the lowest level in more than two years.
Data on both existing- and new-home sales due later this month will provide further clues on the outlook for the US housing market.
–With assistance from Chris Middleton.
(Adds Bloomberg Economics comment)
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