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A wooden house frame at a residential construction site in Elk Grove, California. File photo.
US Single-Family Housing Starts Fall as Permits Hit 3.5-Year Low
WASHINGTON — October 20, 2026
Construction of single-family homes in the United States fell sharply in September, while permits for future projects dropped to their lowest level in three and a half years. Higher mortgage rates, rising building costs and weaker buyer demand are putting pressure on the housing market.
Single-family housing starts declined 4.6% from August to a seasonally adjusted annual rate of 859,000 units, according to data released by the U.S. Commerce Department's Census Bureau on Tuesday. This was the lowest level since September 2025. Despite the monthly decline, starts were still 2.6% higher than a year earlier.
Permits for future single-family construction fell 4% to an annual rate of 845,000 units, the lowest since March 2023. The decline suggests builders are becoming more cautious about starting new projects as high borrowing costs make homes harder for many Americans to afford.
Mortgage rates have risen in recent weeks. The average rate for a 30-year fixed mortgage reached 7.40% last week, its highest level in nearly three years, according to Freddie Mac. Higher Treasury yields, alongside inflation pressures linked to the U.S.-Israeli war with Iran, have contributed to rising borrowing costs.
High mortgage rates are adding to the burden of already expensive homes. The combination has deepened affordability concerns for buyers, while rising material and fuel costs and labor shortages are creating further challenges for builders.
A survey by the National Association of Home Builders released on Monday showed that confidence among single-family homebuilders fell in October to its lowest level since June 2012. The group pointed to higher construction costs, expensive mortgages and worsening labor conditions amid an immigration crackdown. A separate report from the National Association of Realtors showed that pending home sales fell to a record low in September.
The slowdown also reflects an increase in unsold newly built homes. Weak sales have left builders with more completed properties on the market, reducing their incentive to begin additional projects. However, the United States continues to face a broader housing shortage, which has helped keep home prices high.
The latest figures suggest residential investment may have returned to a declining trend in the third quarter after recovering in the second quarter. Residential investment includes home construction and renovation activity. Morgan Stanley estimated that it contracted at an annualized rate of 4% in the third quarter, while broader estimates of U.S. economic growth remained above 3%.
The housing sector's relatively small share of total economic output has helped the wider economy continue growing despite the weakness in construction. The government is scheduled to release its advance estimate of third-quarter gross domestic product, or GDP, next week. GDP measures the total value of goods and services produced in an economy.
Other construction figures also showed weakness. Overall housing starts fell 5.2% in September to an annual rate of 1.221 million units, below economists' expectations of 1.305 million. Starts for buildings with five or more units dropped 7.2% to an annual rate of 349,000.
The number of single-family homes approved for construction but not yet started remained at 151,000, close to a four-and-a-half-year high. Meanwhile, completed single-family homes fell 2.4% to an annual rate of 840,000, the lowest level since May 2020.
Some economists believe slower construction could help prevent the supply of unsold homes from growing further. Others warn that high energy costs and uncertainty over the economic impact of the conflict involving Iran could continue to weigh on residential building.
The September data point to continued pressure on the U.S. housing market, with expensive mortgages and weak sales discouraging new construction even as the country faces a shortage of homes. A sustained recovery will depend in part on whether borrowing and building costs ease enough to bring more buyers back into the market.
