Housing starts dropped 9.4% in September to a seasonally adjusted annual rate of 1.256 million and the pace for August was revised upward, according to the Department of Housing and Urban Development and the Department of Commerce.
August’s housing starts are now 1.6% above last year’s rate of 1.236 million.
“The start of new home construction hit a post-recession peak last month, so it’s no surprise that it has retreated,” said Holden Lewis, an expert at Nerdwallet. “Although homes are being built with vigor and we are far from a housing slump, there is something to worry about: All this construction isn’t doing much to increase the supply of homes that are affordable to first-time buyers, who are still left with few purchasing options and high prices.”
Single-family starts rose 0.3% from last month to 915,000 units while multifamily starts retreated a whopping 28.3% to 327,000 units, according to the report.
Single-family completions decreased 8.6% to a rate of 932,000, while multifamily completions decreased 10.9% to 285,000.
Overall, permits fell 2.7% to a seasonally adjusted annual rate of 1.387 million. Single-family permits increased 0.8% to 882,000 and multifamily permits declined 7.5% to 470,000.
Lawrence Yun, chief economist of the National Association of Realtors said the housing industry is plagued by a shortage of housing inventory.
“Apartment vacancy rates are low and the number of homes listed for sale are just not enough,” Yun said. “Naturally, developers should be boosting home construction to relieve the tight supply. To a degree, it is moving in the right direction: single-family housing starts rose a notch in September and are higher by 4% from a year ago. But multifamily housing starts, which have been predominately apartments and not condominiums, sharply declined by 28% in September and are down 6% from a year ago.”
With new condo-rules on FHA mortgages, Yun says developers should anticipate rising demand for multifamily units.