Builders, however, said they "continue to remain cautious due to ongoing supply-side constraints and concerns about a slowing economy." The 30-year fixed mortgage rate has dropped more than 135 basis points to an average of 3.57%, according to data from mortgage finance agency Freddie Mac.
Further declines are likely with the Fed expected to cut interest rates for the third time later this month to limit the drag on the economy from a 15-month U.S.-China trade war, which has weighed on business spending and manufacturing. The U.S. central bank cut rates in September after reducing borrowing costs in July for the first time since 2008.
Economists expect a mild rebound in residential investment in the third quarter after it contracted for six straight quarters, the longest such stretch since the 2007-2009 recession.
Single-family homebuilding, which accounts for the largest share of the housing market, rose 0.3% to a rate of 918,000 units in September, the highest level since January. Single-family housing starts fell in the Northeast, West, and Midwest, but rose in the populous South.
Permits to build single-family homes rose 0.8% to a rate of 882,000 units last month, the highest level since February 2018.
Starts for the volatile multi-family housing segment plunged 28.2% to a rate of 338,000 units in September. Permits for the construction of multi-family homes dropped 8.2% to a rate of 505,000 units last month.