US Housing Starts Fall 5.2% in September, Missing Expectations
Key Facts
US housing starts fell 5.2% in September to a seasonally adjusted annual rate of 1,221,000 units, according to a release from the US Census Bureau and the Department of Housing and Urban Development on October 20, 2026. The decline coincided with a drop in building permits, as companies in the sector faced pressure from high mortgage rates, material costs and labor shortages, according to the home builders association. Housing starts forecasts listed in EL7's economic calendar stood at about 1.3 million units, compared with an actual reading of 1.221 million. The previous reading recorded in the calendar was 1.288 million units, before the release of the lower September estimate. Housing units authorized by building permits stood at a seasonally adjusted annual rate of 1,400,000 units, down 0.2% from the previous month, according to the bureau.
On an annual basis, construction trends diverged between single-family homes and units in larger buildings, according to details of the Census Bureau's September release. Single-family housing starts rose 2.6% from the same month a year earlier, despite the monthly decline in overall residential construction activity. By contrast, starts of units in buildings with 5 units or more fell 25.9% year on year, marking a decline for that category against growth in single-family homes. From January to September 2026, total housing starts fell 1.1% from the corresponding period, while single-family starts declined 4.0%, according to figures that were not seasonally adjusted. Single-family home completions fell 2.4% in September from the previous month.
The sector's weakness extended to sentiment among single-family home builders in October, as their confidence index fell 3 points to 29, according to the National Association of Home Builders. That brought the index to its lowest level since June 2012, as the pressures identified by the association in its assessment of builders' conditions persisted. Describing the backdrop to those pressures, the association said in its September statement: "High mortgage rates, worsening labor shortages and rising material costs are weighing on builder sentiment." More than a third of builders reported immigration enforcement activity in their markets during the month preceding the October statement, according to the association. It said the activity caused construction delays and also deterred workers legally present in the country from reporting to job sites.
On current sales, the index of builders' current sales conditions fell two points to 33 in October, according to the association's housing market indicators. The decline also extended to companies' outlook, with the index of sales expectations for the next 6 months falling 5 points. The expectations index stood at 32 in October, compared with 33 for the current sales conditions index in the same month. The drop in the sales expectations index was larger than the decline in companies' assessment of current sales, with both components of the builder survey falling. The decline in assessments of current sales and sales expectations coincided with the drop in the overall single-family builder confidence index reported by the association in its October statement.
Prospective buyer traffic also weakened in the October survey, with its index falling 5 points to 18, according to the National Association of Home Builders. The association's chief economist, Robert Dietz, said buyer traffic reached its lowest level since April 2012, excluding the start of the pandemic in April 2020. Prospective buyer interest thus returned to levels not seen since that period, excluding the month at the start of the pandemic that Dietz identified in the historical comparison. The monthly decline in the buyer traffic index matched the drop in sales expectations and exceeded the decline in the current sales conditions index. Weak buyer interest in October followed declines in housing starts and permit estimates in September, alongside the continued financing and operational pressures cited by the association.
On pricing, the average discount offered by home builders held at 6% in October, according to the association, for 7 consecutive months. That average persisted in a month when builders reported declines in their assessments of current sales, expectations for future sales and prospective buyer traffic. The next official release on new home sales is scheduled for October 27, 2026, covering September sales, according to the US Census Bureau's calendar. The bureau will then release October residential construction data on November 18, 2026, covering the period following the month that recorded declines in housing starts and permits. The official calendar sets November 25, 2026, for the release of October new home sales, following the release of residential construction data for the same month.