Recent government data indicates that US housing starts experienced a slight decrease last month, primarily driven by a decline in multi-family projects, which overshadowed gains in single-family construction. According to the Census Bureau and the Department of Housing and Urban Development, housing starts fell by 0.5%, adjusting to an annual rate of 1.35 million units in September.
This contrasts with the revised figure of 1.36 million units reported for August, aligning closely with the consensus forecast of a 0.4% drop from last month’s unadjusted numbers. Commenting on the current trends, Nancy Vanden Houten, Senior US Economist at Oxford Economics, stated that, "Recent hurricanes didn’t appear to have much of an impact on the data, but they might make the data over the next couple of months noisier than usual, particularly as the South typically accounts for more than half of housing starts." Hurricanes Francine and Helene made landfall in September, yet the annual report reflected a slight decrease of 0.7% in housing starts compared to the previous year. The single-family segment showed a promising uptick, increasing by 2.7% from the previous month to reach 1.03 million units and reflecting a robust 5.5% rise on an annual basis.
In contrast, the multi-family sector saw a month-over-month decline of 4.5%, landing at 317,000 units, alongside a worrying 16% year-on-year decrease. Regionally, the data reveals a stark contrast: the Northeast experienced a remarkable surge of 58% in housing starts; however, the Midwest, South, and West reported significant downturns.
Looking ahead in the market, building permits—a key indicator for future homebuilding—witnessed a 2.9% drop on a monthly basis, settling at 1.43 million units, which was below market expectations of 1.46 million units. This fall was notably marked by an 11% drop in authorizations for buildings housing five or more units, while permits for single-family homes increased slightly by 0.3% when adjusted for seasonal variations.
Over the year, the overall consolidated permits decreased by 5.7%. Moreover, the overall housing completions fell by 5.7% month-over-month, reaching a total of 1.68 million units. Despite these setbacks, a recent report from the National Association of Home Builders and Wells Fargo illustrated a positive shift in homebuilder confidence, which improved for the second consecutive month in October, fueled by expectations that mortgage rates will moderate in the near future.
"Looking further ahead, we anticipate a recovery in housing starts, gaining momentum next year, which could eventually elevate the pace to an annualized rate of 1.5 million units," Vanden Houten continued. "A variety of factors such as declining mortgage rates, less restrictive credit conditions for builders, and a persistent demand for increased housing supply are expected to support this upturn.".