September housing starts revealed

“Higher interest rates are hurting the ability of buyers to purchase a new home, particularly at the entry-level end of the market,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB). “Higher rates also harm the supply side of the market by increasing the cost of construction and development loans.”

While home construction activity slowed in September, NerdWallet mortgage expert Holden Lewis noted that it’s not the whole story. “Builders are starting on construction on fewer single-family houses, but they’ve been breaking ground on more apartments and condominiums,” he said. “Residential developers evidently are responding to the housing affordability crisis by constructing multifamily units, which tend to cost less than houses.”

Single-family starts decreased 4.7% month over month to a seasonally adjusted annual rate of 892,000 in September. Multifamily starts were at an annualized 530,000 pace.

“Starts have slowed more in the single-family segment, as the multifamily sector has performed more strongly due to the rental apartment industry, which has accounted for the bulk of multifamily starts,” Mangold added. “Encouragingly, starts are adjusting in real-time to market conditions, limiting the risk of an oversupply and resulting market crash like that which occurred in the Great Recession. The housing market as a whole has been underbuilt for much of the past decade and a half, and there is still significant demand for housing overall.”