Single-family housing starts, building permits tumble in September

WASHINGTON — Single-family homebuilding and permits for future construction fell sharply in September ​as higher mortgage rates suppressed demand, suggesting residential investment resumed its declining trend in the third quarter.

Single-family housing starts, which account for ‌the bulk of homebuilding, dropped 4.6% to a seasonally adjusted annual rate of 859,000 units last ⁠month, the Commerce Department's Census ​Bureau said on Tuesday. Single-family building ⁠permits decreased 4.0% to a rate of 845,000 units.

Mortgage rates have surged ‌in recent weeks, with ‌the 30-year fixed rate averaging 7.40% last week, the highest ⁠level in nearly three years, data from ⁠mortgage finance firm Freddie Mac showed. The higher borrowing costs are tracking Treasury yields as the U.S.-Israeli war with Iran fans inflation.

A National Association of Home Builders survey on Monday showed sentiment among single-family homebuilders plunged in October to the lowest level since June 2012. The NAHB ‌blamed rising material costs and mortgage rates as ​well as more expensive diesel and "worsening" labor conditions amid an immigration crackdown for the deterioration in sentiment.

Slumping sales have led to a glut of unsold houses on the market, further reducing the incentive for developers to break ground on new single-family housing projects. Despite the overhang of new single-family homes, there is a national housing shortage, which is ​keeping home prices elevated.

Housing affordability has dominated campaign messaging ahead of the Nov. ‌3 midterm election, ‌which will ⁠determine control of Congress. President Donald Trump earlier this year refused to sign a bipartisan housing affordability bill, calling it "a big yawn" as he pressed Congress, including fellow Republicans resisting his demands, to first pass separate and contentious ‌voting requirements.

Residential investment rebounded ​in the second quarter, also reflecting renovations, ‌making a small contribution ⁠to gross ​domestic product. The rise followed five straight quarterly declines.

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