A rise in housing starts this September points to boosted confidence among home builders, signaling hope for home buyers.
Single-family housing starts increased 2.7% from August and were up 5.5% from September 2023, according to the latest data from the U.S. Census Bureau and U.S. Department of Housing Urban Development (HUD).
Housing starts came in at a seasonally adjusted annual rate of 1.354 million – down 0.5% from August. Meanwhile, builder sentiment rose in October for the second consecutive month.
“Single-family starts increased for the second consecutive month, which aligns with the improvement in homebuilder sentiment over the last two months,” First American Deputy Chief Economist Odeta Kushi pointed out. “Builders' improved outlook is likely due to the beginning of the Fed’s easing cycle and expectations of lower interest rates in 2025.”
The National Association of Home Builders (NAHB) released a statement about the latest data, urging policy makers to prioritize the supply-side of the market as the election looms, and "let builders build."
“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. “Nonetheless, NAHB is forecasting a gradual, if uneven, decline for mortgage rates in the coming quarters, with corresponding increases for single-family construction."
Single-family permits increased 0.3% from the month prior, marking the third consecutive month of increases.
“Permits are a leading indicator of future starts, and they increased for the third consecutive month in September, a positive sign for a supply-starved housing market,” Kushi said. “The housing market remains structurally underbuilt, and homeowners with locked-in low mortgage rates are keeping existing-home inventory limited. More groundbreaking is needed to bridge the gap between supply and demand.”
Single-family housing completions in September were 2.7% below the revised August rate.
“Despite pent-up demand in the housing market, elevated financing costs continue to challenge both buyers and builders,” Kushi cotninued. “While builders are growing more confident in their ability to sell newly built homes, they continue to face supply-side hurdles to building them, from higher construction costs to ongoing skilled labor shortages. Lower interest rates may help stimulate progress, but momentum will likely be constrained by these persistent challenges."
