September Housing Starts: Permits Stable Amid Soaring Interest Rates

• Housing starts dropped to 1.44 million in September, down 8.1% from revised August 2022 figures and down 7.7% from September 2021, according to the U.S. Census Bureau. 
• Housing permits issued in September were up 1.4% from August and down 3.2% from a year ago, to 1.56 million (SAAR). 
• 1.43 million (SAAR) homes were completed in September, up 6.1% from August and up 15.7% year-over-year.

Soaring interest rates took hold of the housing market in September, with rates climbing towards 7%. The new construction industry was not blind to the impacts this will have on housing demand. As many buyers remain priced out of the market, home builder sentiment plunged far below expectations in September, and housing starts fell again likely in response to interest rates picking up as builders anticipate demand falling even more. But permits picked up slightly from last month, higher than consensus, giving some hope that the accelerated momentum in the new construction market that started during the pandemic is still pushing on. Bottlenecks of supply chain disruptions and labor shortages have opened up leading to more new home completions hitting the market. More permits, more new homes moving through the backlog, and a higher rate of new home sales last month all send some positive signals despite a significant decline in sentiment. Housing affordability will remain a major hurdle for buyers until inventory can pick up enough to combat high prices - putting pressure on the new construction industry to continue building for a healthier housing market.