U.S. single-family starts surged in September, pointing to sustained housing market strength even as a drop in the construction of multi-family dwellings pushed overall home building activity to a 1-1/2-year low.
Groundbreaking on single-family housing projects, which accounts for the largest share of the residential housing market, jumped 8.1 percent to a 783,000-unit pace last month, the Commerce Department said on Wednesday. That was the highest level since February.
A tightening labor market, which is steadily pushing wages higher, as well as low mortgage rates are underpinning demand for housing. Single-family starts are also getting a boost from a chronic shortage of previously owned homes available for sale.
Overall groundbreaking activity, however, declined 9.0 percent to a seasonally adjusted annual pace of 1.05 million units last month, the lowest level since March 2015. It was dragged down by starts for the volatile multi-family segment, which plunged 38.0 percent to a 264,000-unit pace in September.
But with rents rising at their fastest pace in 10 years, last month's drop in multi-family starts is likely to be temporary.