U.S. housing starts fall amid high mortgage rates and hurricanes

Construction of new homes in the United States decreased by 3.1% in October, according to government data released on Tuesday. The annual pace of housing starts fell to 1.31 million from 1.35 million in September, marking the lowest level since July and falling short of Wall Street's expectations of a 1.34 million pace.

New-home construction has declined by 4% compared to last year, primarily due to a decrease in single-family home construction. However, multi-family home construction saw an increase of nearly 10% in October.

Building permits, which indicate future construction activity, also fell by 0.6% to a rate of 1.42 million. The rise in mortgage rates beginning in October prompted builders to reduce new single-family home projects. Freddie Mac data showed the 30-year mortgage rate increased from 6.12% on October 3rd to 6.72% by the end of the month.

The regional impact varied across the U.S., with home construction rising by about 21% in the West and increasing by 9% in the Midwest, while it dropped by 33% in the Northeast and decreased by 9% in the South.

Permits for single-family homes edged up slightly by 0.5%, whereas permits for multi-family homes decreased by 3%. Despite these fluctuations, builders remain optimistic about future prospects due to anticipated lower mortgage rates and potential regulatory relief under a second Trump administration.

Builders' sentiment reached a seven-month high according to an industry survey conducted on Monday, reflecting confidence in selling newly built homes.

Bradley Saunders, an economist at Capital Economics specializing in North America, commented on the situation: “The decline in housing starts in October was exactly as we had expected given the hit to construction in the South from Hurricane Milton and should partially reverse in November.” He added that he expects "the recent rebound in new sales and rising homebuilder confidence will help [housing] starts to rise to a peak of 1.08 million [annualized] in the second half of 2025.”