Getty/Dan Reynolds Photography
A surge of construction activity in the Northeast drove single-family home starts higher in September, as builders rushed to take advantage of a dip in mortgage rates.
Nationally, single-family housing starts hit a seasonally adjusted annual rate of 1,027,000 last month, up 2.7% from August’s revised figure, according to U.S. Census Bureau data released on Friday. Single-family starts were up 5.5% from one year ago nationwide.
Construction of single-family homes rose on an annual basis in every region except the West, which saw a decline of 0.9%. In the Northeast, single-family starts surged 10.6% on the month and a whopping 77.4% from one year ago.
Realtor.com® senior economist Joel Berner warns that the figures from the Northeast should be “taken with a grain of salt” due to possible amplification from seasonal adjustment.
“Blips in the raw data during off-peak months of the year in regions with a high degree of seasonality, like the Northeast, can skew the adjusted figures that are primarily reported. We will be interested to see how next month’s revisions of the September data come in,” he says.
The construction surge came as mortgage rates averaged 6.18% in September, their lowest level in two years, according to Freddie Mac. The Federal Reserve issued its widely anticipated rate cut that month, but the further decline in mortgage rates that many had expected has not yet materialized.
Mortgage rates have increased on a weekly basis each of the past three weeks, hitting 6.44% this week. Combined with disruption from Hurricanes Helene and Milton, that could put a significant dent in housing starts for the month of October.
“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 National Association of Home Builders Chief Economist Robert Dietz.
Permits for single-family homes, a leading indicator of new construction, rose a slight 0.3% from August, to 970,000 annualized in September, but they remained lower than a year ago.
Multifamily starts continue to decline
Last month’s single-family construction was offset by a decline in multifamily starts, which have trended down after a post-pandemic building boom that brought millions of units into the construction pipeline.
Starts of multifamily units dropped 9% from August, to a seasonally adjusted annual rate of 327,000. September’s figure for multifamily starts was down 16% from a year earlier.
Total housing starts for September were an annualized 1,354,000, down 0.5% from August and 0.7% lower than one year ago. Overall housing starts have generally trended downward since hitting a 14-year peak in spring 2022.
“More new construction is essential for easing the housing affordability challenge. Affordability is still a major constraint, particularly for first-time homebuyers and low- and moderate-income renters,” says Bright MLS Chief Economist Lisa Sturtevant.
Experts say that undersupply of housing is a key factor driving the housing affordability crisis, an issue that has taken on new prominence ahead of the November presidential election.
Both Donald Trump and Vice President Kamala Harris have vowed to boost construction of new homes. Trump has said he would cut building regulations and open up federal lands for construction, while Harris has promised tax incentives for builders to spur the construction of 3 million additional homes.
“Housing affordability has been elevated to the national level during the presidential campaign, bringing more attention to the issue,” says Sturtevant. “However, the federal government simply does not have a lot of influence over the factors that drive housing affordability. The amount of new housing that gets built primarily is driven by land use and regulatory decisions made at the local level.”
This story is developing.