US housing starts increase in the multi-family housing segment

WASHINGTON (Reuters) – Housing construction in the United States rose in October following a rebound in multi-family housing projects, but single-family home construction retreated for a second consecutive month, suggesting that the market for homebuilding is still weak. Housing remains weak as mortgage rates rise.

The other details of the report released Tuesday by the Commerce Department were also unclear. Building permits declined last month and home construction was the lowest in one year. Housing starts rose 1.5% to a seasonally adjusted annual rate of 1.228 million units last month.

Data from September were revised to show that housing starts dropped to a rate of 1.210 million units instead of the previously announced pace of 1.201 million units.

Building permits fell 0.6% to reach a rate of 1.263 million units in October. Economists polled by Reuters forecast 1.225 million housing units started last month.

Rising borrowing costs as well as shortages of land and labor, which led to a reduction in inventories and rising house prices, hampered the housing market. . This makes home buying unaffordable for many workers because of the slow pace of wage growth.

The 30-year fixed mortgage rate stands at 4.94%, its highest level in seven years, according to data from the Mortgage Finance Agency Freddie Mac. Wages rose 3.1% in October from a year ago, causing real estate inflation prices to drop by about 5.5%.

Residential investment contracted in the first nine months of the year and housing should continue to dampen economic growth in the fourth quarter. Economists expect housing activity to remain weak until the first half of 2019.

US financial markets were little affected by Tuesday's data on housing starts.

THE FALLS OF BUILDING UNIFAMILIAL HOUSES

Single-family home construction, which accounts for the largest share of the housing market, fell 1.8% to 865,000 units in October, after declining in September.

Single-family home construction lost momentum from its 948,000-unit pace last November, the highest pace in more than a decade.

A survey conducted on Monday showed that single-family home builders' confidence reached its lowest level in more than two years in November, with builders reporting that "customers are pausing due to concerns over rising home rates." Interest and the price of houses ".

Single-family housing starts in the south, which account for the bulk of housing construction, fell 4.0% last month. Construction of single-family homes jumped 14.8% in the northeast and 2.0% in the west. The revolutionary activity on single-family homes fell 1.6% in the Midwest.

Single-family home permits decreased 0.6% in October to 849,000 units. These permits remain below the level of single-family home starts, suggesting that the potential for recovery in residential construction is limited.

Starts in the volatile multi-family housing segment rose 10.3% to a rate of 363,000 units in October. Building permits for multi-family dwellings decreased 0.5% to 414,000 units.

Tuesday's data also suggests that housing supply will likely remain limited in the near term. Completed house construction in October fell 3.3% to a rate of 1.11 million units, its lowest level since September 2017.

Real estate agents estimate that housing starts and completion rates must be between 1.5 and 1.6 million units per month to fill the inventory gap.

The housing stock under construction rose 0.5%, reaching its highest level in 11 years, with 1.137 million units last month. But the multi-family home segment accounted for just over half of housing starts under construction last month.