New US residential construction declined in September to a four-month low and building permits for single-family homes slid, highlighting a struggling housing market.
Housing starts decreased 5.2% to an annualised rate of 1.22 million, according to federal government data released on Tuesday. The pace trailed all estimates in a Bloomberg survey of economists.
Starts of single-family homes decreased 4.6% to the lowest level in a year, while new construction on multifamily projects fell nearly 7%.
Permit applications for one-family homes, a gauge of future construction, dropped to the lowest since early 2023.
The residential real estate market is being constrained by affordability challenges now further compounded by higher mortgage rates. Homebuilders, whose confidence has slumped to a 14-year low, may also be reluctant to begin construction on new homes before making more progress on inventories.
Sluggish home construction has weighed on economic growth in five of the last six quarters. Before Tuesday’s report, the Federal Reserve Bank of Atlanta’s GDPNow forecast pencilled in residential investment declining an annualised 1.3% in the third quarter.
Completions of single-family homes last month dropped to the weakest pace in more than six years.
“Housing construction — one of the economic sectors most sensitive to interest rates — is facing intensifying headwinds as mortgage rates have moved significantly higher...With inventories already elevated and builders increasingly pessimistic about future sales, residential construction is likely to remain a drag on interest-rate-sensitive activity in coming months,” says Bloomberg Economics.
