US Housing Starts Fall 4.6% to Lowest Level Since May 2020
US housing starts fell 4.6% in October to 1.25 million homes annualized, the lowest since May 2020 and below economist estimates of 1.33 million. Single-family construction rose 5.4% to 874,000 but remained near two-year lows. Builder sentiment stays weak at 39 despite mortgage rates falling from 7% to 6.25% and declining home prices, with industry leaders noting the expected recovery has not materialized.
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US housing construction activity continued its downward trend in October, with new residential starts falling to their lowest point since the early pandemic period. The decline reflects ongoing challenges in the housing market despite some recent improvements in affordability conditions.
Housing Construction Declines Below Expectations
Government data released Friday showed housing starts decreased 4.6% to an annualized rate of 1.25 million homes in October. This figure fell significantly short of the median economist estimate of 1.33 million housing starts surveyed by Bloomberg.
| Metric | October Rate | Change |
|---|---|---|
| Total Housing Starts | 1.25 million (annualized) | -4.6% |
| Economist Estimate | 1.33 million | - |
| Single-Family Homes | 874,000 (annualized) | +5.4% |
Mixed Performance Across Housing Categories
While overall construction declined, single-family home starts showed some resilience, rising 5.4% to an annualized pace of 874,000 units. However, these levels remained near the lowest points of the past two years, indicating continued weakness in the sector.
The data suggests builders have continued to reduce activity throughout the fall, focusing on cutting construction times and finding operational efficiencies while waiting for customer demand to recover.
Builder Sentiment Remains Weak
Homebuilder confidence continues to reflect challenging market conditions. The National Association of Home Builders and Wells Fargo sentiment index registered a weak reading of 39, with any figure below 50 indicating more builders view conditions as poor rather than good.
Some Affordability Improvements Noted
Despite the construction slowdown, certain affordability factors have shown improvement:
- Mortgage Rates: Declined from near 7% in May to 6.25% earlier this month, reaching a more than one-year low
- Home Prices: New-home prices fell for most of the previous year according to federal data through August
- Rate Trajectory: Mortgage rates fell consistently throughout September and October
Industry Leaders Await Recovery
Lennar Corp. Chief Executive Officer Stuart Miller addressed the market conditions during an earnings call, stating: "Last quarter, I noted that declining interest rates could signal the start of a market recovery. Unfortunately, that turnaround has not yet materialized."
Policy Response Measures
In response to growing affordability concerns, recent policy proposals have emerged including banning institutional investors from purchasing single-family homes and directing Fannie Mae and Freddie Mac to purchase $200 billion in mortgage bonds to help reduce borrowing rates.
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