Housing starts rise on pickup in multifamily projects

New U.S. home construction rose in September, led by a pickup in multifamily groundbreakings.

Residential starts increased 7% last month after falling by the most in over a year in August, according to government data released Wednesday. Multifamily dwellings rose more than 17% after also slumping the prior month.

Applications to build — a proxy for future construction — fell to 1.47 million. Permits to build one-family homes ticked up to the highest level since May 2022, while multifamily authorizations declined to the lowest in nearly three years.

While the increase partially offset a sizable drop in the prior month, the housing market as a whole remains depressed amid soaring mortgage rates and high prices that are driving affordability down to historically lows.

Though the high-rate environment had initially been beneficial to homebuilders — who saw prospective buyers flee to new construction amid limited resale supply — that's starting to change. The recent pickup in borrowing costs to the highest level in decades is now discouraging many buyers from house-hunting altogether.

Micah Green/Bloomberg

As a result, homebuilder sentiment fell to a nine-month low in October as they grew more pessimistic on current and future sales.

Housing starts rose in all regions except the Northeast, where groundbreakings sunk to the lowest level in more than two years.

Data on both existing- and new-home sales due later this month will provide further clues on the outlook for the housing market.