Apartment construction plunged sharply in October, as the pace of homebuilding slipped amid a broader cooling of the real estate market. Housing starts — both houses and apartments— fell last month 11% to a seasonally adjusted annual rate of 1.06 million homes, the Commerce Department said Wednesday. Single-family house construction declined 2.4%. Last month’s drop mostly stemmed from a 25.5% slide in the volatile multi-family category that includes apartments, a sector that had posted a sharp increase in September. The government also revised downward overall housing starts in September and August.
The slowdown comes after a steady year of gains. Home construction has climbed 10% year-to-date as solid levels of hiring have improved consumer confidence and encouraged more people to buy houses or move to new apartment complexes. The additional construction marked a turnaround for a real estate sector that had been among the weakest pieces of the recovery from the Great Recession. Yet the market’s upward trajectory now shows signs of stalling as rising prices, tight inventories and the economic uncertainty reflected in the stock market have sidelined many would-be buyers.
Building permits rose 4.1% in October to an annual rate of 1.15 million after falling in September. The rebound last month suggests that apartment construction, which accounted for the majority of the increase, could swing upward in the coming months as more Americans have turned to renting. Nearly 33% of buildings completed so far this year were apartment complexes and condo towers, compared to just 27% before the start of the recession in late 2007. The recovery from that economic downturn over the past six years has reshaped the housing market as those who lost their homes to foreclosures and recent college graduates have moved into rental properties.
The percentage of Americans who own homes has fallen to nearly a 48-year low of 63.7%. And the growth in home sales enjoyed this year appears unsustainable without significant income growth. Relatively low supplies of homes on the markets have pushed prices upward, straining down payments savings. Sales of existing homes jumped 4.7% last month to a seasonally adjusted annual rate of 5.55 million, the National Association of Realtors said last month.