September housing starts revealed

Experts weigh in on the latest home construction data

September housing starts revealed

US housing starts declined once again in September, reflecting the cooling housing market and affordability issues plaguing the single-family sector.

The construction of privately-owned homes in September was at a seasonally adjusted annual rate of 1.44 million, an 8.1% decline from the revised August estimate of 1.57 million, the Census Bureau reported Wednesday.

“Rising mortgage rates, which are predicted to continue rising through year’s end, have exacerbated existing affordability concerns in the for-sale housing space,” said Kelly Mangold, principal at RCLCO Real Estate Consulting.

“Higher interest rates are hurting the ability of buyers to purchase a new home, particularly at the entry-level end of the market,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB). “Higher rates also harm the supply side of the market by increasing the cost of construction and development loans.”

While home construction activity slowed in September, NerdWallet mortgage expert Holden Lewis noted that it’s not the whole story. “Builders are starting on construction on fewer single-family houses, but they’ve been breaking ground on more apartments and condominiums,” he said. “Residential developers evidently are responding to the housing affordability crisis by constructing multifamily units, which tend to cost less than houses.”

Single-family starts decreased 4.7% month over month to a seasonally adjusted annual rate of 892,000 in September. Multifamily starts were at an annualized 530,000 pace.

Read more: Single-family home prices log slowest pace in 11 years

“Starts have slowed more in the single-family segment, as the multifamily sector has performed more strongly due to the rental apartment industry, which has accounted for the bulk of multifamily starts,” Mangold added. “Encouragingly, starts are adjusting in real-time to market conditions, limiting the risk of an oversupply and resulting market crash like that which occurred in the Great Recession. The housing market as a whole has been underbuilt for much of the past decade and a half, and there is still significant demand for housing overall.”

Overall permits rose 1.4% to a 1.56-million-unit annualized rate in September and were up 0.3% on a year-to-date basis. Single-family permits were down 3.1% to an 872,000 unit rate, marking the seventh consecutive month of decline. Meanwhile, authorizations of multifamily units increased by 7.8% to an annualized 644,000 pace.

The number of single-family homes under construction – 800,000 – is slowing due to prior declines in housing starts, according to NAHB.

“The ongoing decline for single-family construction mirrors weakness for single-family builder sentiment, which has now declined for 10 straight months and stands at half the level of a year ago,” said NAHB chief economist Robert Dietz. “The September single-family production level is below a 900,000 annualized rate and the lowest level since May 2020.”