The number of housing starts ticked up in September despite high mortgage rates, the latest mixed signal from the housing market.
Housing starts, the change in the number of new residential buildings that began construction, rose 7% from August to this past month, according to a Wednesday report from the Census Bureau. They are now at an annual rate of 1.358 million. From August 2022, they fell 7.2%.
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September marked a bounce back from August, which saw the lowest level of starts since June 2020.
“Housing starts rebounded in September, but context is key. Last month’s big dip means the bar was low for monthly growth,” tweeted Odeta Kushi, the deputy chief economist for First American. “Builders are generally feeling more pessimistic.”
The rate of new permits, which are seen as a proxy for future construction, last month was 7.2% below the rate in September last year.
Mortgage rates have been pushed to multiyear highs recently in the wake of the Federal Reserve’s campaign to raise interest rates to curb inflation. The average rate on a 30-year fixed-rate mortgage has now hit 7.92%, according to Mortgage News Daily. That number marks the highest level in 23 years.
The housing market was hot during much of the pandemic because the Fed slashed interest rates to near-zero levels, causing ultra-low mortgage rates for homebuyers. Those historic rates spurred a massive upsurge of demand, causing prices to rise and new construction to skyrocket.
That dynamic shifted abruptly last year as the Fed reversed course and hiked rates. Mortgage rates quickly lurched far higher than they were, and home prices fell.
The higher rates have had ripple effects across the entire housing ecosystem.
New home sales fell 8.7% from July to August to a seasonally adjusted annual rate of 675,000, according to the Census Bureau. Meanwhile, existing home sales fell by 0.7% from July to August to a seasonally adjusted rate of 4.04 million.
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Additionally, rental prices fell nationwide last month.
A Rent.com report released on Monday found that rent prices fell by just over 2% in September from the month before. The national median rent price tumbled to $2,011, the lowest price recorded since April. The decrease in rents from August knocked more than $40 off the national median price and is the largest monthly decline since last year.
