New U.S. home construction declined in September and permit applications for single-family dwellings fell, adding to evidence that the highest mortgage rates in two decades are sapping demand and discouraging new builds.
Residential starts decreased 8.1% last month to a 1.44 million annualized rate, according to government data released Wednesday.
The median estimate in a Bloomberg survey of economists called for a 1.46 million pace.
Applications to build, a proxy for future construction, rose to an annualized 1.56 million units, led by multifamily properties.
Permits for construction of one-family homes fell 3.1% to a more than two-year low of 872,000 in September.
The housing market is bearing the brunt of the Federal Reserve’s interest-rate hikes as they aim to free the economy of stubborn inflation.
The real estate sector is especially susceptible to rising borrowing costs, and the Fed is projected to push ahead with another 75 basis-point increase in early November.
Homebuilder sentiment has declined every month this yearr and is now at the worst level since the early days of the pandemic, according to data released Tuesday.
An S&P supercomposite index of builder stocks has slumped about 35% this year, compared with a roughly 22% drop in the S&P 500.
The slowdown in demand this year, paired with consistent hiring, has led to some easing in labor constraints for builders. Construction payrolls are at their highest since 2007.
The government’s report showed single-family housing starts dropped 4.7% to an annualized 892,000 rate, the slowest since May 2020. Construction of multifamily dwellings also declined.
Local journalism is essential.
Give directly to The Spokesman-Review's Northwest Passages community forums series -- which helps to offset the costs of several reporter and editor positions at the newspaper -- by using the easy options below. Gifts processed in this system are not tax deductible, but are predominately used to help meet the local financial requirements needed to receive national matching-grant funds.
Subscribe now to get breaking news alerts in your email inbox
Get breaking news delivered to your inbox as it happens.