U.S. home construction fell 5.3 percent in September, a sign that rising mortgage rates may be weighing on the market.
The Commerce Department said Wednesday that housing starts slipped last month to a seasonally adjusted annual rate of 1.2 million, down from 1.27 million in August. So far this year, starts have increased 6.4 percent. But the pace of homebuilding has downshifted since May.
Homebuyers are facing new cost pressures that could be dampening demand.
Mortgage buyer Freddie Mac says that the average 30-year fixed-rate mortgage jumped to 4.9 percent last week, the highest level since 2011. The combination of higher borrowing costs and rising home values has made home ownership less affordable.
Builders appear to be adapting to the affordability challenges. Starts for multi-family buildings such as apartments have increased at a faster clip than single-family houses year to date.
Still, much of September’s decline came from a decline in ground breakings for multi-family buildings.
Housing starts fell last month in the South and Midwest, but they increased in the Northeast and West. The construction data can be volatile, so the regional levels of homebuilding can change sharply on a monthly basis.
Permits, an indicator of future activity, fell 0.6 percent to an annual rate of 1.24 million.