Housing starts surged unexpectedly in October, suggesting some relief for homebuyers grappling with tight inventory.
Housing starts were up 1.9% last month to a 1.37 million annualized rate, their highest point in three months, according to data from the U.S. Census Bureau.
Single-family starts rose a modest 0.2%, adding to a 3.2% month-over-month increase in September, though they remain down 10.6% from the start of 2023. Multifamily starts saw a 6.3% boost to an annualized 402,000 pace.
Permits also increased by 1.1% to 1.49 million, a boon after slipping the month prior. Permits indicate how many homes will be built in the coming months.
Single-family permits rose 0.5% to 968,000, their highest level since May 2022, while multifamily permits jumped to a rate of 469,000.
High interest rates have pushed some out of the market and weighed on homebuilders, eroding builder confidence in November. But stock shortages, paired with strategic financial incentives like rate buydowns, have kept buyers interested in new construction.
The National Association of Home Builders expects further gains moving forward. The group predicts a 5% increase for single-family starts in 2024 as improving inflation data makes further Fed rate hikes less likely.
“While builder sentiment was down again in November, recent macroeconomic data point to improving conditions for home construction in the coming months,” said NAHB Chief Economist Robert Dietz.
“In particular, the 10-year Treasury rate moved back to the 4.5% range for the first time since late September, which will help bring mortgage rates close to or below 7.5%. Given the lack of existing home inventory, somewhat lower mortgage rates will price-in housing demand and likely set the stage for improved builder views of market conditions in December.”
New home sales blew analyst expectations out of the water in September. October’s data will be available later this month.
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