By JOSH BOAK
AP Economics Writer
WASHINGTON (AP) — U.S. home construction fell by 5.3 percent in September, a sign that recent hurricanes and rising mortgage rates may be weighing on the market.
The Commerce Department said on Wednesday that housing starts slipped last month to a seasonally adjusted annual rate of 1.2 million, down from 1.27 million in August. So far this year, starts have increased by 6.4 percent. But the pace of homebuilding has decelerated since May.
Ground breakings in September were also likely slowed by Hurricane Florence’s landfall in North Carolina — and ground breakings could possibly be depressed in October after Hurricane Michael hit the Florida panhandle.
“Starts are stagnating as the housing market slows, though September’s numbers were suppressed by the hurricane affecting the Carolinas,” said Tendayi Kapfidze, chief economist at Lending Tree, an online loan broker.
Homebuyers are facing new cost pressures that could be dampening demand.
The mortgage buyer Freddie Mac says that the average 30-year fixed-rate on mortgages rose to 4.9 percent last week, the highest level seen since 2011. The combination of higher borrowing costs and rising home values has made houses less affordable.
“It may be tempting to draw national conclusions from these storm-related dips and rallies, but the regional blips can’t obscure the year-long malaise in the national single-family home construction market: Starts have been hit or miss, sales flat and permits trending downward for months,” said Aaron Terrazas, a senior economist at the real-estate firm Zillow.
After the Commerce Department released the report, shares in home-building companies and building-materials retailers dropped in Wednesday morning trading. Shares of the building companies Lennar, PulteGroup and D.R. Horton were each down by more than 2 percent, and shares of Home Depot and Lowe’s slumped by more than 3 percent.
Builders appear to be adapting to the difficulties. This year so far, starts for multi-family buildings such as apartments have increased at a faster clip than those for single-family houses.
Still, much of September’s decline came from a slowdown in ground breakings for multi-family buildings.
Housing starts decreased last month in the South and Midwest, but they increased in the Northeast and West. These sort of construction data can be volatile, so the regional levels of homebuilding can change sharply on a monthly basis.
Permits, an indicator of future activity, fell by 0.6 percent to an annual rate of 1.24 million.