US Single-Family Housing Starts to Decline as High Mortgage Rates Persist

USA: U.S. single-family homebuilding saw a sharp decline in October, falling by 6.9% to a seasonally adjusted annual rate of 970,000 units, likely impacted by Hurricanes Helene and Milton, which disrupted activity in the South. This drop in single-family starts follows a 10.2% decline in the South, where extensive hurricane damage occurred, and a 28.7% plunge in the Northeast. However, the Midwest and West saw slight increases in single-family starts, up by 4.6%. Multi-family housing starts, in contrast, rose 9.8% to a pace of 326,000 units, contributing to an overall 3.1% drop in total housing starts, which fell to 1.311 million units. Economists had forecasted a smaller decline to 1.33 million units. The overall housing starts have also decreased by 4.0% from the previous year.

Despite some positive momentum in multi-family construction and a slight increase in housing permits, the overall housing market remains subdued due to higher mortgage rates, which continue to limit affordability and borrowing power. The Federal Reserve’s tighter monetary policy, aimed at combating inflation, has kept borrowing costs elevated, curbing the rebound in residential investment, which has been sluggish for the past two quarters. As mortgage rates stay high, especially with most homeowners locking in rates below 4%, the incentive to move remains low, contributing to a tight supply of entry-level homes. Economists have adjusted their GDP growth forecast for Q4, now estimating a 2.4% growth rate, slightly down from 2.5%.

Source: Reuters