With a large number of homes still under construction and more new home completions, builders grew increasingly cautious as mortgage rates soared to a 23-year high.
What happened: The October increase in housing starts was larger than expected. While housing starts and permits are still struggling to match levels from a year ago, starts remain above their pre-pandemic level.
The biggest surprise came from the increase in multi-family construction. After declining for most of 2023, multi-family starts moved up in October. After increasing again since March, single-family starts were essentially flat in October. This is partly due to a large number of completed homes coming on the market as well as the large number of homes that are still under construction. Higher financing costs and slowing demand due to higher mortgage rates may have also contributed to the slowdown.
Why this matters: Homebuilder sentiment fell again in October and builders grew more cautious. With housing completions still above year ago levels and a large number of homes still under construction, a large increase in mortgage rates could slow demand, sales and cause inventory to increase.
Starts lead home completions. Although single family starts peaked in 2021 and declined last year, starts began to increase again in March of this year. The increase in starts during the first few months of this year means more homes are still on the way to provide more opportunities for prospective buyers.
