Housing Projects In USA Show a 12-Year Decline in September
In a month that has seen so many crucial industry declines, the housing industry falls victim to this as well. Housing starts in the US are recording the lowest they have in twelve years. This comes after investments in the volatile multi-family housing segment saw the sharpest decline of all segments.
Single-family construction keeps scaling
For the fourth month straight, single-family housing projects continued to rise. Experts are attributing this to the state the real estate market is in where low mortgages are driving the market. Market experts see this as a core support that comes as the economy continues to slow in other major segments.
The commerce department announced on Thursday that housing starts saw a 9.4% decline in September. The seasonally adjusted rate for September stood at 1.256 million new housing units. The majority of these were in the single-family housing segment while the multi-family segmented declined.
The Commerce Department also announced that it opted to revise the data for August upwards. This saw the highest acceleration level for homebuilding recorded in twelve years. The department also revised August data upwards to 1.386 million units from a previous estimate of 1.364 million new housing projects.
Economists had forecast housing starts for September to decrease to a mere 1.320 million units. However, the housing starts rose by a 1.6% margin in September on a year-on-year basis. While housing permits in August were the highest, they have been since 2007, they fell 2.7% in September. The number for August was 1.425 million units, for September, the figure stood at 1.387 million units.
The Fed’s Easing Policy Paying Off
The housing sector is one of those that most severely suffer from any rate change. This year, the Fed cut interest rates twice and that is starting to pay off in the housing sector as well. Mortgages have gone down for the first time since last year’s year-on-year highs recorded.
The housing sector which contributes 3.1% of the US economy continues however continues to face challenges. Land and labor constraints remain the biggest challenges that the sector faces. However, the confidence in homebuilders is increasing. Statistics show that homebuilders’ confidence increased between one and one and a half on a year on year basis in September.
Homebuilders, however, admit to caution in investing owing to the supply side constraints and risks of a slowing economy. The worst hit by the slowed growth is the 30-year fixed mortgage that dropped a little more than 135 basis points. This drop has seen it drop to an average of 3.7%.
Experts anticipate further declines with the Fed expected to cut interests further this month. However, there is also optimism that a mild rebound will happen in the third quarter. The market has witnessed decline in six straight quarters. This decline is the longest since the 2007-2009 recession.
Single-family houses continue to be the backbone of the real housing sector. In September, the segment recorded a 0.3% increase to a magnificent rate of 918,000 units. Permits to build the same rose 0.8% last month to stand at 882,000 units.