Bad weather caused both new housing starts and permits to decline in the United States, but the overall market could be set for moderation in the coming months
House starts rebound from a sharp drop in August AFP / Chris DELMAS

Construction of new homes in the U.S. recovered in September after falling in August to the lowest level since 2020.

Housing starts rose 7% on a monthly basis to 1.36 million units, after a drop of 13% in August, the Census Bureau said Wednesday. The number is still 7.2% lower than in September of 2022.

The report also showed that permits for new construction fell 4.4% from August and 7.2% from a year ago.

The housing industry is suffering from the highest mortgage rates in almost three years. The average 30-year fixed rate rose to 7.57% in the week ended Oct. 12, the fifth consecutive increase, Freddie Mac said Thursday.

Higher rates discourage homebuyers of making purchases. In August, pending home sales dropped 7.1%, the National Association of Realtors said in a statement on Sept. 28.

Mortgage rates are directly affected by Federal Reserve policy and reactions in the Treasury market. The U.S. central bank maintained the rate in the range of 5.25% to 5.50% on Sept. 20, the highest level in 22 years, and some of its officials have publicly spoken in favor of an additional increase before the end of the year.