In the wake of Hurricanes Harvey and Irma, homebuilding in the U.S. slipped to a one-year low in September, likely putting real estate agents on edge in some markets.
According to a report this week from the Commerce Department, the hurricanes disrupted the construction of single-family homes in the South. This likely had an impact on third quarter economic growth.
More telling for agents, the Commerce Department data also indicated a decline in building permits, raising concerns that the housing market recovery was stalling. Home building and sales are well below their peaks before the housing bubble burst in 2006.
“Residential construction should be a hefty drag on third-quarter GDP growth,” said Michael Gregory, deputy chief economist at BMO Capital Markets in Toronto. “Housing activity has shifted from leading the economic expansion to now just following it, at best.”
According to the data, housing starts fell 4.7 percent to a seasonally adjusted annual rate of 1.127 million units last month, the Commerce Department said. This marked the lowest level since September 2016 and was the third monthly decline in starts.
In the South, groundbreaking fell nearly 10 percent, the lowest level in two years. Single-family home building fell by more than 15 percent – a one-year low.
Building permits fell 4.5 percent to a rate of 1.215 million units in September.
“September’s drop in starts underscores the importance of Florida and Houston,” Mark Vitner, a senior economist at Wells Fargo Securities in Charlotte, N.C., told CNBC.
Homebuilding has been sliding this year, but economists remain optimistic that the low level of unemployment will soon spark a rebound in sales and construction. Even though construction activity has fallen in recent months, homebuilding is 6.1 percent higher than a year ago.
“Builders need to be mindful of long-term repercussions from the storms, such as intensified material price increases and labor shortages,” National Association of Homebuilders Chairman Granger MacDonald, a homebuilder and developer from Kerrville, Texas, said in a statement.
Real estate agents also are finding that a tight supply of homes for sale combined with rising prices is translating into an affordability challenge for many would-be buyers.
In September, construction was down in all regions of the country except the West, where construction starts rose 15.7 percent. Construction fell the most in the Midwest, a drop of 20.2 percent. Construction was down 9.3 percent in the South and 9.2 percent in the Northeast