US September Housing Starts Decline, Multifamily Housing Starts Hit Four-Month Low

According to the Zhitong Finance and Economics APP, the slowdown in new home construction in the United States in September was offset by a decrease in multi-family housing projects, despite an increase in single-family home construction.

Government data released on Friday showed that after a significant rebound in August, the number of new housing starts in September fell by 0.5% to an annualized rate of 1.354 million units, slightly below the expected 1.35 million units.

Single-family housing starts increased by 2.7% to an annual rate of 1.03 million units, the highest level in five months. Multi-family housing starts declined by 9.4% to a four-month low.

The indicator of future construction activity, building permits, fell by 2.9% to an annualized rate of 1.43 million units. Single-family building permits increased by 0.3% to 970,000 units.

Although single-family housing starts have increased, the pace is still below the frenetic pace seen at the end of 2021 and the beginning of 2022 when mortgage rates were close to 3% and a historic lack of existing homes for sale drove demand for new homes.

However, with the Federal Reserve raising interest rates to the highest level in 20 years, demand has weakened, ultimately leading to the highest level of new home supply for builders in 16 years.

Since 2022, housing construction has had the largest impact on third-quarter Gross Domestic Product (GDP). Prior to the data release, the Atlanta Fed's GDPNow forecast indicated that following a 0.11 percentage point decrease in the second quarter, residential investment would decrease by 0.43 percentage points.

Regionally, two out of four regions saw an increase in the single-family housing start rate, with the South region growing by 6.6%, reaching the highest level in five months, and the Northeast region growing by 10.6%.

Despite recent increases in mortgage rates after hitting a two-year low in mid-September, sustained housing recovery will still take time. Nevertheless, following the Fed's 50 basis point rate cut last month, builders have expressed optimism about the prospect of lower housing financing costs in recent earnings conference calls.

Senior economist Sal Guatieri of BMO Capital Markets stated in a report, "Given that affordability remains a pressing issue in many areas, housing construction may stall before the Fed enters an easing cycle and mortgage rates drop another percentage point."

KB Home CEO Jeffrey Mezger mentioned that the reduction in borrowing costs should revitalize the resale market, leading to stronger demand for new homes.

The new housing start report indicated a 5.7% decrease in the completion of new single-family homes to an annual rate of 1.68 million units, while the number of projects under construction dropped by nearly 2% to the lowest point in almost three years.

New residential construction data shows significant fluctuations, with the government report indicating that 90% of people believe monthly changes range from a 13.5% decrease to a 12.5% increase