US Home Construction Rebounds in September Despite Mortgage Rate Increase

Despite a spike in mortgage rates, housing starts in the US rebounded by 7% in September to an annual rate of 1.35 million units, according to Commerce Department data. However, applications to build fell by 4.4% over the month, indicating a decline in future construction. Building permits are also down by 7.2% compared to the same time last year. The low supply of existing homes on the market is providing a favorable backdrop for homebuilders, keeping prices elevated despite efforts by the Federal Reserve to cool the economy and suppress housing inflation. The National Association of Home Builders/Wells Fargo Housing Market Index fell to its lowest reading since January 2023, reflecting lower levels of buyer traffic and decreased housing affordability due to higher interest rates. Rates are expected to remain elevated as the Federal Reserve signals a longer period of peak interest rates.