In new data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, residential housing construction starts dropped 1.6% in September as compared to the previous month’s reading. This rate is the lowest level of housing starts in five months. Also concerning, building permits – a leading indicator of future construction – registered a sharp drop, down 7.7% below the previous month.
See more on housing construction starts
The latest government data on residential construction seemed to indicate a cooling of the housing market – perhaps reflecting a cooling economic expansion. Housing is a major driver of the U.S. economy and has an even bigger impact on other related industries, such as furniture, appliances, and technology.
Overall privately-owned housing starts in September came in at a seasonally adjusted annual rate of 1,555,000. This rate is 1.6% below the revised August rate of 1,580,000 but 7.4% higher than the rate of 1,448,000 in August 2020, during the depths of the pandemic. Note also that the government also revised the August reading downward. It was first reported at a rate of 1,615,000.
Single-family housing starts during September came in at a seasonally adjusted annual rate of 1,080,000 – flat to exactly the same 1,080,000 reading in August. And the September reading was 2.26% down from the rate of 1,105,000 units in September 2020.
These numbers are all below the market watcher’s expectations. According to a survey of economists by the Wall Street Journal, economists had anticipated a more modest cooling of only around 0.03% to a level of 1.61 million units, instead of the 1.6% decline to 1,555,000 units.
Regional Breakdown Shows Pain in Northeast & South Regions
Looking at the results on a regional basis, once again the Northeast region took it on the chin with a -27.3% decline, followed by the South region with a -6.3% decline. Both the Midwest and West regions showed gains of 6.9% and 19.3% respectively.
However, it is likely the reading on permits issued during the period that will give economists more to think about. Again, permits issued are a leading indicator of future construction. In this latest data, permits issued in September on a seasonally adjusted annual rate came in at 1,589,000 units or 7.7% below the revised August rate of 1,721,000 units. Permits for single-family homes were issued at a rate of 1,041,000 units or 0.9% below the revised August rate of 1,050,000 units. However, the single-family permit rate is -7.1% below the rate of 1,121,000 units in September 2020.
There are many dynamics impacting the housing segment, such as elevated materials cost, builder manpower shortages, rising home prices, rising mortgage rates and more.