Washington: The already sluggish pace of US home building dipped further last month as construction fell in the South and Midwest regions, the government reported Wednesday.
The slowdown, which reversed much of August’s gains, followed the mid-month clobbering by Hurricane Florence, which tore through mid-Atlantic states.
The result was more bad news for what has become a lone dark spot on the world’s largest economy.
The monthly figures are subject to broad margins of error, and officials caution trends may take six months to appear.
But slow construction has tightened the supply of homes for sale, pushing up prices and eating into sales even as interest rates rise, analysts say.
Total housing starts fell 5.3 percent from a downward-revised August to a seasonally adjusted rate of 1.20 million, with most of the decline in the volatile area of apartments.
Analysts had been expecting a slightly smaller decrease to 1.22 million. The rate was still 3.7 percent above the pace recorded in September of last year.
Building jumped 29 percent in the Northeast but fell about 14 percent in both the Midwest and the South, the largest region by far.
However, permits for new construction, which economists say are a more reliable measure and less susceptible to weather changes, fell more slowly that housing starts.
New authorizations fell 0.6 percent to an annual rate of 1.25 million. This was one percent below the year-ago rate and marked the second straight monthly decline.
Analysts say scarce labor and rising input costs, particularly for lumber, which is subject to tariffs on Canadian imports, have weighed on the pace of construction.
Decline in demand for mortgages as interest rates rise has also weighed on sales, which could reduce the need to replenish inventories.
Ian Shepherdson of Pantheon Macroeconomics said a “temporary” rebound could occur later in the autumn, but the recent 0.3 percentage point increase in mortgage rates would likely bring sales back down again.
“The bottom line here is straightforward; the housing market has peaked for this cycle,” he said in a client note.