WASHINGTON Reuters - U.S. homebuilding unexpectedly fell in September amid persistent shortages of inputs and labor which are crimping the housing market and general economic activity.
Housing starts dropped 1.6% to a seasonally adjusted annual rate of 1.555 million units last month, the Commerce Department said on Tuesday. Data for August was revised to a rate of 1.580 million units from previously reported 1.515 million units.
Economists polled by Reuters forecast that starts would rise to a rate of 1.620 million units.
Permits for future homebuilding decreased 7.7% to a rate of 1.589 million units last month.
Though lumber prices have tumbled in recent months, the lower prices have yet to filter through to builders. Building materials, such as windows and electric breaker boxes, are short lived. The supply chain has been strained by the COVID-19 pandemic's upsetting of labor market dynamics, which has pushed up prices across all segments of the economy.
Starts have fallen from the 1.725 million unit-pace level scaled in March, which was more than a 14 1 2 - year high. There is a huge amount of construction of houses planned but not yet approved by construction teams.
A survey from the National Association of Home Builders on Monday showed confidence among single family homebuilders rising further in October, but noted that builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times. The housing market was boosted early in the coronavirus pandemic by an exodus from cities to suburbs and other low-density locations as Americans sought more spacious accommodations for home offices and online schooling. Tailwind is ebbing as workers return to offices and schools reopened for in-person learning, thanks to COVID 19 vaccinations.
The inflation of high construction is further lowering mortgage rates. The 30 year fixed mortgage rate rose from 2.99% last week to an average of 3.05 in the prior weeks, according to data from mortgage giant Freddie Mac.
Although still low by historical standards, rising borrowing costs could make homeownership less affordable for some first-time buyers. In July, house prices posted annual double-digit growth to record highs.