Housing starts fell last month, led by multifamily slowdown

U.S. housing starts decreased in September, driven by a pullback in multifamily construction, as lingering supply-chain constraints, shortages of skilled labor and elevated materials costs continue to challenge builders.

Residential starts fell 1.6% last month to a 1.56 million annualized rate, according to government data released Tuesday. The median estimate in a Bloomberg survey called for a 1.62 million pace.

Applications to build, a proxy for future construction, fell 7.7% to an annualized 1.59 million units in September. That's the largest monthly decline since February.

Cheap borrowing costs and a pandemic-fueled migration to the suburbs supported housing demand and construction through late 2020 and earlier this year. But high materials costs, unpredictable supply-chain delays and labor shortages have strained builders' ability to keep up with still-solid demand in more recent months.

Single-family starts were unchanged in September at an annualized 1.08 million units as multifamily starts — which tend to be volatile and include apartment buildings and condominiums — decreased 5% to 475,000.

Meanwhile, the report indicates builders are making little headway on project backlogs. The number of single-family homes authorized for construction but not yet started — a measure of backlogs — edged lower to 144,000 in September but remains near a 15-year high.

While high construction costs helped fuel a surge in prices that has cooled buyer interest somewhat, builders remain generally optimistic. A gauge of homebuilder sentiment rose to a three-month high in October — holding well-above pre-pandemic levels — a separate report showed Monday.