• October housing starts rose 1.5 percent from September, but were down 2.9 percent from a year ago, according to the U.S. Census Bureau.
• Housing permits were down both month-over-month (-0.6 percent from September) and year-over-year (-6 percent from October 2017)
• Housing completions fell 3.3 percent from September and 6.5 percent from a year ago.

The housing market may still be suffering a hangover from a stormy September marked by deep disruptions in the all-important Southeast region — leading indicators for the Southeast were particularly weak again in October. But last month’s weakness was broad-based and today’s October starts and permits data, despite some residual storm effects, gives us a clearer view into how builders nationwide are beginning to react and adjust to a housing market that is undeniably shifting under their feet.

By not overextending themselves in response to red-hot demand over the past few years, many builders could be well-positioned to be more strategic in response to a market that’s likely to hinge more on local factors than national trends over the next few years. We can expect to see more builder investment in relatively affordable areas with strong economic fundamentals and good underlying demand, even as builders may begin to pull back from pricier markets and/or those with less diverse economic bases.

A months-long decline in lumber and other materials costs may also benefit those builders that lock in low prices today for projects slated to begin in coming months. And an uptick inventory, while still very modest after years of declines, may have the effect of bringing those home shoppers discouraged by a lack of choice over the past few years back into the market. But rising mortgage interest rates and home prices that continue to grow at a pace well above historic norms are undoubtedly putting a crimp on buyers’ budgets, and builders have shown little capacity to build at the lower price points where much of the heat in the market still resides. This shift toward a less-affordable, but also slower-moving market with slightly more inventory, will present its share of opportunities and challenges for builders, and those nimble enough to quickly shift gears in response to market changes will be best-positioned going forward.