Figures: Construction of US new homes fell more than 9% in September, but a new increase in permits suggests the decline in so-called home starts is just a short break in a real estate market that is renewed by lower mortgage rates.
Housing starts slipped to an annual rate of 1.26 million last month from a revised 1.39 million in August, the government said Thursday.
The decline was concentrated in new buildings with five units or more that are usually rented.
Economists polled by MarketWatch had expected the start to fall to $ 1.32 million after a surprisingly strong gain last month. In August, housing starts peaked for 12 years.
Meanwhile, permits to build new houses fell about 3% to an annual rate of 1.39 million. However, the number of permits submitted was almost 8% higher than the previous year.
What happened: Work on new houses was slowed down in all four regions, with the Northeast and Midwest experiencing the greatest falls.
Construction of apartments, apartment complexes and other projects with five or more units fell 28% in September. This type of new building can fluctuate sharply from month to month.
New construction of single-family dwellings actually rose slightly to an annual rate of 918,000, marking the highest level since the start of 2019. Detached housing has increased for four consecutive months and is 2.8% higher than a year ago.
About three-quarters of all American homes are single-family homes.
Big picture: Construction has gone up after a sharp decline in interest rates. A 30-year mortgage, for example, has fallen to as low as 3.5% from more than 5% the year before.
Builders still do not produce enough new houses to meet demand, and it however, it is unlikely to dramatically scale up construction in light of fresh concerns about the health of the US economy. This keeps house prices higher than they would otherwise, effectively limiting total sales.
What do they say? "The upward trend of building a family is in line with other housing data showing strong demand for new homes by home buyers in response to lower mortgage rates and rising incomes," said Nationwide senior economist Ben Ayers.
"[H] ousing is a real bright spot in the midst of trade-induced gloom," said chief economist Ian Shepherdson of Pantheon Macroeconomics.
Market Response: Dow Jones Industrial Average
DJIA, + 0.31%
and S&P 500
SPX, + 0.56%
rose at the beginning of Thursday's trading.
The 10-year return on the Treasury
TMUBMUSD10Y, + 1.25%
was little changed at 1.76%. Returns have fallen by about 45% over the past year, reducing mortgage rates at the same time. Many loans are linked to changes in the 10-year note.