US homebuilding bounced back in September, after dropping in August to the lowest levels since 2020 as mortgage rates climbed.
Housing starts, a measure of new home construction, jumped 7% above the revised August estimate. Starts rose to a seasonally adjusted annual rate of 1.358 million last month, falling short of expectations of 1.38 million, according to data released Wednesday by the Census Bureau.
The number of units started was 7.2% lower than a year ago.
Building permits dropped in September, falling 4.4% from August’s revised number to a seasonally adjusted annual rate of 1.473 million.
Permits were 7.2% lower than a year ago.
“September numbers were a mixed bag, with starts up and permits down, but both remain low by historical standards, suppressed by high mortgage rates,” said Robert Frick, corporate economist with Navy Federal Credit Union.
“Builders continue constructing smaller homes using less land, and offering incentives, but to build our way out of the housing shortage we’ll need mortgage rates well below current levels,” he said.
Single‐family housing starts, which account for most of the construction, rose 3.2% in September from the revised August figure, at a seasonally adjusted annual rate of 963,000.
In September, single-family starts fell in the Northeast by 19%, but posted month-to-month gains in other regions of the country.
“Slower construction activity in the Northeast could reflect cooler demand as well as challenges builders face in finding availability lots,” said Lisa Sturtevant, chief economist at Bright MLS.
Homebuilders are becoming increasingly anxious about persistently high mortgage rates and cooling demand, she said.
“To keep buyers interested, many builders have been offering upgrades or buying down mortgage rates,” she said. “Rising home prices coupled with mortgage rates approaching 8% will mean there will be fewer buyers in the market to entice later this year.”
Multifamily construction, which is buildings with five or more units, jumped 17% from August, although new multifamily starts are down 31% from last year.
Apartment construction had been surging over the past year, with a record number of new rental units coming online in many metro areas, and rents are coming down, said Sturtevant.
“With more rental inventory and declining rents, it is now a better financial deal to rent instead of buy in many markets in the US,” she said. “The relief some renters are feeling could be short-lived, however, if new apartment construction slows in the fourth quarter.”
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