U.S. new home starts increased in September on a sharp gain in single-family house construction while building permits climbed, indicating residential building had plenty of momentum at the end of the third quarter.
Residential starts increased 1.9 percent to a 1.42 million annualized rate from a month earlier, according to a government report released Tuesday. The median forecast in a Bloomberg survey of economists called for a 1.47 million pace. Applications to build, a proxy for future construction, rose 5.2 percent to a 1.55 million rate, the fastest since 2007 and topping forecasts.
Construction of one-family homes climbed in September to the highest level in more than 13 years, and accounted for 78 percent of total home building which was the largest share since 2010. At the same time, fewer multifamily projects were started, which reflects a shift in tastes because of the pandemic as Americans seek more space and flock to suburbs.
“Rock-bottom mortgage rates and families looking for more space are fueling demand and more than offsetting the impact of labor market turmoil,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc, said in a note. “We continue to believe that the single-family sector will lead the way up for housing, with multifamily providing somewhat of a negative offset.”
Housing has been a highlight for the economy during the recovery from the covid-19 pandemic. The recent upswing in residential real estate shows few signs of slowing as mortgage rates continue to fall to new lows, helping explain record-high optimism among the nation’s builders.
The government’s most-recent report on new-home sales showed that in August, the supply of properties would last 3.3 months, the shortest time frame in records back to 1963.
At the same time, the damage to the job market caused by the measures aimed at controlling the spread of the coronavirus remains a head wind.
Millions remain unemployed and Congress has yet to agree on a new relief package to support the jobless and small businesses. Other restraints on the residential real estate market and construction include higher costs for building materials.
The government’s report showed beginning construction of one-family homes rose to a 1.11 million annual rate. Multifamily starts, a category that tends to be volatile and includes apartment buildings and condominiums, decreased 16.3 percent to a 307,000 pace.
In the South, the nation’s largest region, new single-family home construction starts rose 17.7 percent to a more than 13-year high. They also rose in the Northeast and West.
Permits to build single-family homes increased 7.8 percent to the strongest level since 2007. The number of one-family residential projects authorized but not yet started advanced in September to the highest since 2018, indicating growing builder backlogs.
Robust demand is evident in builders’ results. KB Home in September reported a 27 percent year-over-year increase in orders during the three months through August, beating expectations.