US housing starts fall 5.2% to 1.221 million rate in September
By TopHolding Editorial · Monday, October 19, 2026 at 8:00 PM
Housing starts declined 5.2% in September to a 1.221 million pace, according to First Trust Portfolios. Economists point to higher mortgage rates and elevated construction costs as major headwinds.
According to Nate Gerze, Economist, Brian S. Wesbury, Chief Economist, and Robert Stein, Deputy Chief Economist at First Trust Portfolios, residential construction remains under significant pressure as borrowing costs climb. U.S. housing starts fell 5.2% in September to a seasonally adjusted annual rate of 1.221 million units, missing the consensus forecast of 1.305 million and dropping 7.4% below year-ago levels. Meanwhile, building permits dipped 0.2% to a 1.400 million rate, topping expectations of 1.385 million.
First Trust's economists highlight that the September pace was below every forecast tracked by Bloomberg and marked the second-lowest reading since the onset of the pandemic. Both single-family and multi-unit construction declined during the month, falling 4.6% to 859,000 and 6.7% to 362,000, respectively. Regionally, activity dropped in the Midwest and West, held flat in the Northeast, and rose in the South.
The analysts argue that housing is absorbing the brunt of Federal Reserve monetary policy as one of the economy's most rate-sensitive industries. They point out that 30-year mortgage rates have risen roughly 110 basis points since February to around 7.2%, following renewed rate hikes intended to address energy-driven inflation. In addition to financing pressures, the team notes that homebuilders face tighter labor availability linked to immigration enforcement, tariffs that elevate materials expenses, and restrictive local regulations. With completions slowing to a 1.192 million pace in September, First Trust emphasizes that builder sentiment has dropped to its lowest level since 2012.
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Key terms:
1. Housing starts: The number of new residential construction projects that have begun during a specific time period.
2. Building permits: Official authorizations issued by local governments that allow builders to proceed with planned construction.
3. Basis point: A unit of financial measurement equal to one-hundredth of a percentage point, or 0.01 percent.
Source: Nate Gerze, CFA – Economist, Brian S. Wesbury – Chief Economist and Robert Stein, CFA Dep. Chief Economist, First Trust Portfolios — Data Watch. Read the original at ftportfolios.com.
