The Commerce Department said Wednesday housing starts in the U.S. plummeted to an annual rate of 1.047 million in September, missing the median forecast for 1.175 million. Fueled by a steep decline in the construction of multifamily homes, housing starts now tumbled 9% to a 1-1/2-year low in September.
Building permits, which indicate future housing market activity, came in at 1.225 million, above the estimate for 1.165 million. Construction of single-family units did give some hope for the housing market. The data indicate residential construction will remain a drag on gross domestic product (GDP) in the third quarter.
August’s starts were revised up to a 1.15 million-unit pace from the previously reported 1.14 million-unit rate. Last month’s drop left the overall housing starts in the third quarter well below their average for the second quarter.
Single-family home building, which represents the largest share of the residential housing market, did increase 8.1% to a 783,000-unit pace in September, the highest level since February.
Housing starts for the volatile multi-family segment plunged 38.0% to a 264,000-unit pace in September. But with rents rising at their fastest pace in 10 years, last month’s drop is likely to be temporary.
But it is possible to rebound in the coming months, as permits for future construction surged 6.3% in September. Single-family permits inched up 0.4% last month. Building permits for multi-family units sharply increased 16.8% in September.