• U.S. housing starts fell 5.2% in September to an annualized 1.221 million, missing the 1.305 million consensus.
  • Single-family starts dropped 4.6%, while multifamily plunged 6.7%, signaling broad weakness.
  • Building permits slipped 0.2% to 1.400 million, slightly beating expectations.

Sharp Slowdown

U.S. housing starts tumbled 5.2% in September to a seasonally adjusted annual rate of 1.221 million, according to the Census Bureau. The reading came in well below the 1.305 million economists had expected, underscoring the toll of mortgage rates above 7% and deteriorating builder confidence. The decline was broad-based, with single-family construction falling 4.6% and multifamily starts dropping 6.7%.

The weakness in starts contrasts with building permits, which slipped just 0.2% to 1.400 million, slightly above the 1.395 million forecast. Permits, which authorize future construction, suggest builders are not entirely pulling back—though the drop in actual groundbreaking indicates caution.

Builder Pessimism Deepens

The September slump comes as builder sentiment has soured. The National Association of Home Builders’ index fell three points in October to 29, its lowest level since June 2012. Builders cited high mortgage rates, elevated construction costs, and weak consumer confidence as key drags. The share of builders cutting prices rose to 43%, up from 38% in September and 35% in August.

“Affordability remains a persistent challenge, and builders are responding with incentives,” said a spokesperson for the NAHB. “But without a meaningful drop in rates, demand will stay subdued.”

Market Reaction and Outlook

Markets showed little immediate reaction to the data, with housing-related stocks mixed in early trading. The release reinforces expectations that residential investment will remain a drag on GDP in the coming quarters. Economists at Wells Fargo (WFC) recently described residential construction as facing “intensifying pressure,” pointing to repeated declines in starts.

While permits held relatively steady, the sharp drop in starts suggests builders are hesitant to break ground amid uncertain demand. The next key test will be whether the weakness persists into the fall, as seasonal factors and mortgage rate trajectories will shape the sector’s path.

Correction: An earlier version of this article misstated the percentage decline in single-family starts. It was 4.6%, not 6.7%.