Recently rising mortgage rates have once again put pressure on housing construction, with housing starts falling month-over-month and year-over-year, according to the latest report.
Housing starts decreased 3.1% from September to October to a rate of 1,311,000, according to the latest data from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This is also 4% below the October 2023 rate of 1,365,000.
“October’s slowdown in new construction activity can be attributed to mortgage rates, which increased in every week of the month after hitting a two-year low in September, and uncertainty leading up to the November election,” commented Realtor.com® Senior Economist Joel Berner.
Regionally, combined single-family and multifamily starts are up 10.4% year-over-year in the Northeast, 1.7% lower in the Midwest, 5% lower in the South due to hurricane effects, and 4.4% lower in the West.
Despite the decline in starts, National Association of Home Builders (NAHB) Chairman Carl Harris noted that builder sentiment has continued to see improvements for the past three months, as “builders anticipate an improved regulatory environment in 2025 that will allow the industry to increase housing supply.”
Single-family housing starts were down 6.9% in October to a rate of 970,000, down only 0.5% year-over-year. On the other hand, multifamily starts increased 9.8% in October to a rate of 326,000, but are down 12.6% on a year-to-date basis.
Building permits saw a 0.6% decrease to a rate of 1.42 million in October. Single-family permits grew 0.5% to a rate of 968,000, up 9.4% year-over-year. Multifamily permits fell 3% to a rate of 448,000. Regionally, permits are 0.9% higher year-over-year in the Northeast, 3.9% higher in the Midwest, 2.4% lower in the South and 4.8% lower in the West.
Housing completions came in at a rate of 1,614,000 in October, 4.4% below September’s rate, but up 16.8% year-over-year. Single-family completions were at a rate of 986,000, 1.4% below September and only 0.2% down year-over-year. Multifamily completions were down 9% to a rate of 615,000, up 61.4% year-over-year.
“Builders are swimming upstream in the current high-rate environment, as buyers are less willing to make a purchase and the costs of financing their new projects remain high,” added Berner. “Builders were also anxious to see which direction the country would choose in terms of new housing policy, and the results of the election have offered more questions than answers.”
CoreLogic Chief Economist Dr. Selma Hepp concluded that this month’s data is a “sign that the housing market will remain anemic through winter, as high mortgage rates continue to hinder recovery.”
“However, with homebuilder confidence gradually increasing, more newly built homes will make their way to market in 2025,” she continued. “The incoming administration could push for more housing to be built, perhaps even making federal lands available for residential construction and potentially limiting regulatory barriers that have added considerable costs to new construction.”
