Single-family starts saw a modest increase in September, despite overall housing construction dropping by a meager 0.5% from August’s adjusted numbers. Currently the seasonally adjusted annual rate sits at 1.35 million units, according to a report from the U.S. Department of Housing and Urban Development and Census Bureau.
While single-family starts increased 2.7% in September to a 1.03 million seasonally adjusted annual rate (a 10.1% increase year over year (YoY)), multifamily units, continued their downward slide. Unaided by a market defined by tight financing and rising abundance of completed projects, multifamily construction decreased 9.4% to an annualized 327,000 pace.
This was accompanied by a rise in home sales as loosening monetary policies saw mortgage rates start to drop, before spiking up once again heading into October. Mortgage rates struck a 6.08% low before steadily climbing back up to where they sit right now at 6.72%, according to Freddie Mac.
Permits rose at an even smaller rate, with overall housing permits sitting 2.9% below the revised Augst rate of 1.47 million and 5.7% below YoY numbers. Single-family authorizations were at a rate of 970,000 in September, 0.3% above the revised August figure of 967,000
“While single-family home building increased in September, higher mortgage interest rates in October are likely to place a damper on growth in next month’s data,” said NAHB Chief Economist Robert Dietz in a press release. Other economists have also pointed to damage from Helene and Milton potentially hampering building in the short term as well.
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“Nonetheless, NAHB is forecasting a gradual, if uneven, decline for mortgage rates in the coming quarters, with corresponding increases for single-family construction. Multifamily construction will remain weak as completions of apartments are elevated.”
Contrasting declining planned builds was an increase in home sales, largely fueled by that brief dip in mortgage rates during September. Sales of newly built single-family homes rose 4.1% to a 738,000 seasonally adjusted annual rate, up 6.3% YoY.
The inventory, at the time, sat at a supply of 470,000 houses, up 8.0% compared to last year, with the median home costing $426,300, unchanged from a year ago. Homes sold below $300,000 shot up according to census data, rising make up 17% of total home sales compared 14% a year ago.
An NAHB survey noted a moderate improvement in homebuilder sentiment in October following this line of thinking. It also showed a slight rise in the share of builders using incentives such as price cuts to attract buyers.
Despite the rising sales, many homeowners remain locked into lower rate mortgages (or have paid off their homes entirely) leading to the “golden handcuff” effect where most homeowners are unwilling to buy into at the current rates. As a result, constructing new homes has become the sole means of adding to the existing inventory.
Overall housing completions decreased 5.7% to a rate of 1.68 million units. The number of housing units under construction fell 1.9% to a rate of 1.48 million units. The inventory of single-family housing under construction rose 0.3% to a rate of 642,000 units.
Multifamily units saw the biggest turnaround with development, with nearly two projects completed accounting for every one project starting.
On a regional level combined single-family and multifamily starts in September were 9.0% higher in the Northeast, 2.0% lower in the Midwest, 4.6% lower in the South and 5.4% lower in the West.
Permits were 0.8% higher in the Northeast, 2.6% higher in the Midwest, 2.2% lower in the South and 5.1% lower in the West.
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