The annual pace of new home construction increased again last month amid a historic shortage of housing inventory and crushing mortgage rates.
Housing starts, a measure of new home construction, jumped by 1.9% in October, compared to the previous month.
Starts rose to a seasonally adjusted annual rate of 1.372 million last month, rising above expectations of 1.35 million, according to data released Wednesday by the Census Bureau.
The number of units started was 4.2% lower than a year ago.
Building permits also ticked up in October, climbing 1.1% from August’s revised number to a seasonally adjusted annual rate of 1.487 million.
Permits were 4.4% lower than a year ago.
“The increase in starts this month shows that builders are anticipating positive conditions over the next year when these homes become available for buyers,” said Kelly Mangold of RCLCO Real Estate Consulting.
The housing market has been constrained by the dramatic swing in mortgage rates over the past two years from under 3% to surpassing 7%, she said.
Many homeowners are currently locked in to ultra-low mortgage rates, which has cooled housing mobility and driven up housing costs, resulting in both an inventory and a mobility crisis, Mangold said.
“An ease in rates would also benefit buyers of new homes, allowing for more affordable mortgage payments,” she said. “The new construction housing market is poised to ensure that inventory is available to meet pent-up demand of households who have been waiting for a reprieve in rates before purchasing.”
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