September Housing Starts: Supply Disruptions Finally Catch Up

• U.S. home builders started 1.555 million new homes in September (SAAR), down 1.6% from August and up 7.4% from September 2020, according to the U.S. Census Bureau.
• There were 1.589 million housing permits filed nationwide in September (SAAR), down 7.7% from August and unchanged form a year ago.
• Builders completed 1.24 million homes last month (SAAR), down 4.6% from August and 13% year-over-year.

The nation's homebuilders found creative ways to keep work going throughout the summer, but continued disruptions in the supply of key building materials and the tight labor market for contractors finally caught up with them in September. Housing starts were down notably from August -- and early numbers from August themselves revised downwards -- as builders balanced elevated demand from consumers with a broken supply chain that has hobbled everyone from do-it-yourself remodelers to large-scale builders. Hurricane Ida, which made landfall in late August and impacted states from the Gulf Coast to New England, also contributed to September’s downbeat report on builder activity. And permits -- the surest sign of building activity still to come -- also stumbled in September, recording the largest monthly drop since February and diminishing prospects for an immediate bounceback in activity. While building activity does remain above pre-pandemic levels despite last month's pullback, builders have said they expect persistent bottlenecks to push up prices for raw materials in coming months and interest rates to rise as the Fed tapers bond purchases on the open market. Both scenarios are likely to continue pushing up finished home prices and pushing down home affordability, testing and possibly diminishing what has been relentless consumer demand for housing to this point.