U.S. single-family homebuilding tumbled in October likely as Hurricanes Helene and Milton depressed activity in the South while permits rose slightly, indicating that an anticipated rebound probably would be muted by higher mortgage rates.
The report from the Commerce Department on Tuesday suggested that residential investment, which includes homebuilding, remained subdued at the start of the fourth quarter after contracting in the last two quarters.
The housing market has been battered by higher borrowing costs as the Federal Reserve tightened monetary policy to combat inflation.
Economists at Goldman Sachs lowered their gross domestic product estimate for the October-December quarter to a 2.4% annualized rate from a 2.5% pace. The economy grew at a 2.8% rate in the third quarter.
“Despite the weather impact on building down in the South, the recession in residential housing construction remains deep in the woods with no daylight seen for buyers facing supply shortages as they hunt for new single-family homes,” said Christopher Rupkey, the chief economist at FWDBONDS.
“The housing shortage and affordability issues will remain unless there is a big jump in new construction.”