U.S. Homebuilding Activity in October

WASHINGTON (Reuters) – U.S. single-family homebuilding saw a significant decline in October, primarily due to Hurricanes Helene and Milton affecting activity in the South. Despite a slight rise in permits, higher mortgage rates are likely to dampen any potential rebound.

Single-family housing starts, which are crucial to homebuilding, fell by 6.9% to a seasonally adjusted annual rate of 970,000 units, according to the Commerce Department’s Census Bureau. September figures were revised upward, showing an increase to 1.042 million units from 1.027 million.

Notably, the South experienced a drop of 10.2% in single-family starts. Meanwhile, permits for upcoming single-family housing construction climbed 0.5% to a rate of 968,000 units.

New construction has made some recovery after challenges posed by rising mortgage rates earlier in the year. However, momentum remains constrained due to housing supply levels not seen since 2008, the impact of hurricanes in the Southeast, and persistently high borrowing costs.

Mortgage rates fell initially as the Federal Reserve began reducing interest rates in September but have recently increased due to strong economic data and concerns regarding potential inflation from President-elect Donald Trump’s policies—chiefly tariffs on imports and mass deportations.

The yield on the benchmark 10-year U.S. Treasury note has climbed to a 5-1/2-month high, closely aligning with mortgage rate changes.

Despite these challenges, a National Association of Home Builders survey indicated that builder sentiment rose to a seven-month high in November, largely attributed to expectations that a Republican-dominated Congress will lead to significant regulatory relief for the industry.