Despite mortgage rates averaging above 7%, the single-family housing market experienced a solid increase in starts during the month of September, driven largely by a lack of resale inventory. According to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, overall housing starts rose by 7% in September to reach a seasonally adjusted annual rate of 1.36 million units. Of these starts, single-family home starts increased by 3.2% to an annual rate of 963,000 but were 12.8% lower year-to-date due to higher interest rates.
Despite ongoing affordability challenges, the housing deficit in resale inventory is supporting builders, as 31% of available homes for sale in August were new-construction projects, the National Association of Home Builders' Eye on Housing reports.
The solid level of single-family starts was a bit of a surprise and may be downwardly revised in future reports given the recent decline in the NAHB/Wells Fargo Housing Market Index. That reading of home builder sentiment has now declined for three straight months, posting a level of just 40 in October. This decrease suggests that the pace of single-family permits and starts may decline during the final months of 2023.