The housing market starts to fall 3.1% as hurricanes hit the southern region

U.S. housing starts fell to the slowest pace in three months in October as hurricanes exacerbated a general softening in construction activity.

The number of new homes last month fell 3.1% to 1.31 million on an annual basis, reflecting a sharp decline in the South, government data released on Tuesday showed.

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Construction activity in the South, which accounts for the bulk of the nation’s residential construction, fell 8.8% as the region’s builders postponed projects in the aftermath of Hurricanes Helene and Milton. Home construction starts have struggled to gain traction this year against the backdrop of a growing number of new homes for sale and mortgage rates nearing 7%.

While construction of single-family homes has increased recently, builders are using incentives to boost sales as the market awaits a decline in financing costs that may be slow to come.

Economists project only a modest decline in financing costs next year. The 30-year fixed-rate mortgage rate rose to 6.86% earlier this month after falling to a two-year low in late September, according to the Mortgage Bankers Association. In its latest forecast, the banking group expects interest rates to fall only to 5.9% by the end of next year.

Some builders, including DR Horton Inc., said in their late October earnings call that the run-up to the presidential election created uncertainty and kept potential buyers at bay.

Construction of new single-family homes fell 6.9% to 970,000 on an annual basis in October. New multifamily housing starts rose 9.6%, the first increase in three months.

Construction permits

Building permits, an indicator of future construction, fell 0.6% to a figure of 1.42 million on an annual basis. Permits for single-family home construction have increased at the fastest pace since April.

Housing construction had a negative effect on economic growth in the second and third quarters. Before the month of October, data from the Federal Reserve Bank of Atlanta begins BBPNow The forecast recorded a slight decline in the fourth quarter.

In addition to the decline in the South, starts in the Northeast fell by almost 33%, to the slowest pace since May. In the West, new construction has jumped to the highest level since the beginning of this year.

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Tuesday’s government report showed completions of new single-family homes fell to 986,000 on an annual basis, the weakest since March and mirroring steep declines in the West and South.

The number of projects under construction fell by almost 2% to 1.47 million year-on-year, the lowest in three years.