2018.10.1709:16:00UTC+00U.S. Housing Starts Pull Back Sharply, Building Permits Unexpectedly Drop

After reporting a substantial increase in new residential construction in the previous month, the Commerce Department released a report on Wednesday showing a bigger than expected pullback in U.S. housing starts in the month of September.

The Commerce Department said housing starts tumbled by 5.3 percent to an annual rate of 1.201 million in September after surging up by 7.1 percent to a revised rate of 1.268 million in August.

Economists had expected housing starts to pull back by about 3.5 percent to a rate of 1.237 million from the 1.282 million originally reported for the previous month.

The sharp drop in housing starts came as multi-family starts plunged by 15.2 percent to a rate of 330,000 in September after spiking by 20.4 percent to a revised rate of 389,000 in August.

Single-family housing starts also fell by 0.9 percent to a rate of 871,000 in September after jumping by 2.1 percent to a rate of 879,000 in August.

The report also showed an unexpected decrease in building permits, which fell by 0.6 percent to an annual rate of 1.241 million in September after sliding by 4.1 percent to a revised 1.249 million in August.

Building permits, an indicator of future housing demand, had been expected to jump by about 4.1 percent to a rate of 1.280 million from the 1.229 million originally reported for the previous month.

The expected decrease in building permits came as a steep drop in multi-family permits more than offset a notable increase in single-family permits.

Multi-family permits slumped by 7.6 percent to a rate of 390,000 in September, while single-family permits climbed by 2.9 percent to a rate of 851,000.

On Tuesday, the National Association of Home Builders released a separate report showing an unexpected uptick in homebuilder confidence in the month of October.

The report said the NAHB/Wells Fargo Housing Market Index inched up to 68 in October from 67 in September. Economists had expected the index to come in unchanged.