Overall U.S. housing starts are down for a second consecutive month, but analysts remain upbeat that demand will be strong for new homes going into 2025.
Homebuilders started work last month on a seasonally adjusted annual rate of 1.311 million units, according to data released Tuesday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development. That's 3.1% below the September figure and 4% below the October 2023 output. Single-family starts totaled 970,000 in October, also below last month and a year prior.
Meanwhile, housing completions in October came in at a seasonally adjusted annual rate of 1.614 million, 4.4% below the revised September estimate of 1.353 million but 16.8% higher than the number in October 2023.
Mortgage rates remain persistently elevated, even after the Federal Reserve announced interest rate cuts in September and November. That's hurting housing affordability, particularly for first-time buyers, and has led some builders to cut prices and offer mortgage-rate buy-downs and other incentives.
Hurricanes Helene and Milton hurt home production in the South by more than expected, but the market should rebound quickly, according to Nancy Vanden Houten, lead U.S. economist at research firm Oxford Economics.
The firm said it expects housing starts in the fourth quarter to be flat compared with the third quarter before improving throughout next year. But there could be "downside risks to our forecast from sticky mortgage rates, as well as labor shortages and higher building costs if we take President-elect Trump's policies on immigration and tariffs at face value," Vanden Houten said in a statement.
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The National Association of Home Builders, however, said homebuilder sentiment improved in November for a third consecutive month. The trade group expects Trump to foster "an improved regulatory environment in 2025 that will allow the industry to increase housing supply,” NAHB Chairman Carl Harris said in a statement.
In addition, NAHB said it expects that more Fed interest rate cuts next year will increase construction and development loans and help boost single-family construction.
While the inauguration of a new president could lead to more homebuilding, builders still face worries over building material costs and labor shortages, Wells Fargo said in a housing report released Tuesday.
Last week, Ryan Marshall, CEO of Atlanta-based PulteGroup, one of the nation's largest homebuilders, said on a webcast that cities and consumers can help boost the housing supply and lower prices by being more accepting of development. Resistance at the local level often kills or stalls new housing projects, even though the increased supply of homes is one of the key ways to moderate prices, analysts say.