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US housing starts fall
[WASHINGTON] US homebuilding tumbled from a more than a 12-year high in September, but single-family home construction rose for a fourth straight month, suggesting the housing market remains supported by lower mortgage rates even as the economy is slowing.
Other data on Thursday showed a deceleration in factory activity in the mid-Atlantic region in October. A 15-month trade war between the United States and China has dented business sentiment, leading to a drop in capital expenditure and a downturn in manufacturing.
Ironically, manufacturing has borne the brunt of the trade tariffs, which the White House says are necessary to protect industries from what it says is unfair foreign competition.
Housing starts declined 9.4 per cent to a seasonally adjusted annual rate of 1.256 million units last month as construction in the volatile multi-family housing segment dropped, the Commerce Department said.
Data for August was revised higher to show homebuilding accelerating to a pace of 1.386 million units, which was the highest level since June 2007, instead of marching to a rate of 1.364 million units as previously reported.
Economists polled by Reuters had forecast housing starts decreasing to a pace of 1.320 million units in September. Housing starts rose 1.6 per cent on a year-on-year basis in September.
Building permits fell 2.7 per cent to a rate of 1.387 million in September. Permits jumped to a rate of 1.425 million units in August, the highest level since May 2007.
The housing market, the most sensitive sector to interest rates, has perked up in recent months, finally benefiting from the Federal Reserve's monetary policy easing, which has pushed down mortgage rates from last year's multi-year highs.
But the sector, which accounts for about 3.1 per cent of the economy, continues to be constrained by land and labor shortages. A survey on Wednesday showed confidence among homebuilders jumped to a more than 1-1/2-year high in October.
Builders, however, said they "continue to remain cautious due to ongoing supply side constraints and concerns about a slowing economy." The 30-year fixed mortgage rate has dropped more than 135 basis points to an average of 3.57 per cent, according to data from mortgage finance agency Freddie Mac.
Further declines are likely with the Fed expected to cut interest rates for the third time later this month to limit the drag on the economy from the trade war, which has weighed on business spending and manufacturing. The US central bank cut rates in September after reducing borrowing costs in July for the first time since 2008.
Economist expect a mild rebound in residential investment in the third quarter after it contracted for six straight quarters, the longest such stretch since the 2007-2009 recession.
Single-family homebuilding, which accounts for the largest share of the housing market, rose 0.3 per cent to a rate of 918,000 units in September, the highest level since January.