U.S. home building fell last month, driven by a sharp decline in the construction of new apartments.
The Commerce Department said Thursday that housing starts dropped 9.4% to a seasonally adjusted annual rate of 1.26 million. The construction of new apartments plunged 28.3% to an annual pace of 327,000.
On a brighter note, single-family home building ticked up 0.3% to an annual rate of 918,000. Single-family construction typically creates more jobs than apartment units.
September’s drop comes after overall home building, fueled by lower mortgage rates, reached a 12-year high in August. Sales of existing homes rose to a 17-month high that month and sales of new homes jumped.
Building permits, a measure of future construction, slipped 2.7% in September to 1.39 million.
Despite last month’s decline, home construction has risen 1.6% in the past year. Single-family home building is up 4.3% from a year ago.
Building permits have also increased in the past year, rising 7.7%. Permits to build single-family homes rose 2.8% in September from a year earlier while apartment permits soared nearly 21%.
In September, construction fell the most in the Northeast, where it plummeted 34.3%. It also dropped sharply in the Midwest, where it declined 18.9%. Starts dropped 4% in the South and 1.9% in the West.
Mortgage rates are near historic lows, with the average interest rate on a 30-year loan below 4%. They may fall further in the coming months if the Federal Reserve cuts short-term rates at its next meeting later this month, as some economists predict.