WASHINGTON — U.S. home construction fell 5.3% in September, a sign that recent hurricanes and rising mortgage rates may be weighing on the market.
The Commerce Department said Oct. 17 that housing starts slipped last month to a seasonally adjusted annual rate of 1.2 million, down from 1.27 million in August. So far this year, starts have increased 6.4%. But the pace of homebuilding has downshifted since May.
September groundbreakings also were likely hurt by Hurricane Florence striking North Carolina — and groundbreakings could be depressed in October after Hurricane Michael hit the Florida panhandle.
Hurricane Florence caused severe damage in North Carolina and other southeastern states. (David Goldman/Associated Press)
“Starts are stagnating as the housing market slows, though September’s numbers were suppressed by the hurricane affecting the Carolinas,” said Tendayi Kapfidze, chief economist at online loan broker Lending Tree.
Mortgage buyer Freddie Mac says that the average 30-year fixed-rate mortgage jumped to 4.9% last week, the highest level since 2011. The combination of higher borrowing costs and rising home values has made home ownership less affordable.
“It may be tempting to draw national conclusions from these storm-related dips and rallies, but the regional blips can’t obscure the yearlong malaise in the national single-family home construction market: Starts have been hit or miss, sales flat and permits trending downward for months,” said Aaron Terrazas, a senior economist at real estate firm Zillow.
Builders appear to be adapting to the affordability challenges. Starts for multifamily buildings such as apartments have increased at a faster clip than single-family houses year to date.
Still, much of September’s decline came from a drop in groundbreakings for multifamily buildings.
Housing starts fell last month in the South and Midwest, but they increased in the Northeast and West. Construction data can be volatile, so the regional levels of homebuilding can change sharply on a monthly basis.
Permits, an indicator of future activity, fell 0.6% to an annual rate of 1.24 million.