Frustrated with the lack of existing-home inventory, more buyers turned to new construction in Sept. despite mortgage rates that topped 7%.
WASHINGTON – Despite elevated mortgage rates averaging above 7%, single-family starts posted a solid gain in September as more buyers turned to builders after facing a dearth of inventory in the resale market.
Overall housing starts increased 7% in September to a seasonally adjusted annual rate of 1.36 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The September reading is the number of housing units builders would begin if development kept the same pace for 12 months.
Within the overall number, single-family starts increased 3.2% to a 963,000 seasonally adjusted annual rate. For all of 2023, however, single-family starts are still lower year-to-year, down 12.8%.
The multifamily sector, which includes apartment buildings and condos, increased 17.6% to an annualized 395,000 pace.
Alicia Huey, chairman of the National Association of Home Builders (NAHB), calls the 7.6% uptick “somewhat unexpected … Our latest builder surveys indicate that starts are likely to weaken in the months ahead due to recent higher mortgage rates.”
“Despite ongoing challenges in the market, the housing deficit of resale inventory continues to provide some market support for builders,” says NAHB Chief Economist Robert Dietz. “Because of a lack of existing homes in the marketplace, 31% of homes available for sale in August were new construction. This compares with a historical average in the 12-14% range. But in another sign that higher interest rates have slowed the market, the number of single-family homes under construction in September was 674,000, which is almost 15% lower than a year ago.”
On a regional and year-to-date basis, combined single-family and multifamily starts are 23.3% lower in the Northeast, 12.9% lower in the Midwest, 7.8% lower in the South and 16.9% lower in the West.
Overall permits – a sign of future home-start activity – decreased 4.4% to a 1.47 million unit annualized rate in September, though single-family permits increased 1.8% and multifamily permits decreased 14.3%.
Looking at regional permit data on a year-to-date basis, permits are 22.3% lower in the Northeast, 16.6% lower in the Midwest, 12.7% lower in the South and 17.6% lower in the West.
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