With more buyers turning to new homes due to lack of inventory in resale market, single-family starts posted a solid gain in September, even with mortgage rates hovering above 7%.
Increasing 7% in September, overall housing starts turned out to a seasonally adjusted 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.
According to Eye On Housing, the September reading of 1.36 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts increased 3.2% to a 963,000 seasonally adjusted annual rate. However, single-family starts are 12.8% lower year-to-date due to higher interest rates. The multifamily sector, which includes apartment buildings and condos, increased 17.6% to an annualized 395,000 pace.
The solid level of single-family starts was a bit of a surprise and may be downwardly revised in future reports given the recent decline in the NAHB/Wells Fargo Housing Market Index. That reading of home builder sentiment has now declined for three straight months, posting a level of just 40 in October. This decrease suggests that the pace of single-family permits and starts may decline during the final months of 2023.