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Construction plummets in the Northeast

New Developments News
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. AP Photo/David Zalubowski, File

WASHINGTON (AP) — US home building fell last month after reaching a 12-year high in August, driven by a sharp decline in the construction of new apartments. Yet single-family home construction ticked higher for a fourth month.

The Commerce Department said Thursday that overall housing starts dropped 9.4 percent to a seasonally adjusted annual rate of 1.26 million. The construction of new apartments plunged 28.3 percent to an annual pace of 327,000.

In September, construction fell the most in the Northeast, where it plummeted 34.3 percent. It also dropped sharply in the Midwest, where it declined 18.9 percent. Starts dropped 4 percent in the South and 1.9 percent in the West.

The report suggests the housing market is in solid shape, despite last month’s drop. The construction of both homes and apartments has risen 1.6 percent in the past year. And single-family home building ticked up 0.3 percent in September to an annual rate of 918,000. Single-family construction typically creates more jobs than apartment units. Permits for single-family home building also rose slightly, a good sign for future building.

Lower mortgage rates and a healthy job market are lifting home sales and the demand for new homes. Sales of existing homes rose to a 17-month high that month, and sales of new homes jumped. The average interest rate on a 30-year mortgage ticked up, but is still at a historically low level of 3.69 percent.

‘‘The upward trend for single-family construction aligns with other housing data that show strong demand for new homes by home buyers in response to lower mortgage rates and rising incomes,’’ said Ben Ayers, senior economist at Nationwide. ‘‘The extremely tight inventory for existing homes is also pushing more buyers into the market for new homes.’’

Building permits have also increased in the past year, rising 7.7 percent. Permits to build single-family homes rose 2.8 percent in September from a year earlier, while apartment permits soared nearly 21 percent.

Mortgage rates are near historic lows, with the average interest rate on a 30-year loan below 4 percent. They may fall further in the coming months if the Federal Reserve cuts short-term rates at its next meeting later this month, as some economists predict.

Residential starts fell 9.4 percent to a 1.26 million annualized rate on weakness in the multifamily category after an upwardly revised 1.39 million pace in the prior month, according to government figures released Thursday that missed estimates in Bloomberg’s survey. Permits, a proxy for future construction, dropped 2.7 percent to a 1.39 million rate that exceeded estimates.

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