Markets
Housing Starts Fell 5.2% in September to 1.221 Million and Pending Home Sales Dropped 7.3% to a Record-Low Index. Homebuilder Stocks Rose 2.8% Anyway
US housing starts fell 5.2% in September to an annual rate of 1,221,000, the Census Bureau said on October 20, with single-family starts at 859,000, their lowest in a year, and permits flat at 1.40 million. An hour and a half later the National Association of Realtors said pending home sales fell 7.3% on the month, against a 0.5% decline expected, taking its index to 66.0, the lowest since the series began in 2001. The homebuilder ETF rose 2.8% because Treasury yields fell.
The housing numbers were worse than the builders' mood had suggested on Monday, and the stocks went up. Privately owned housing starts fell 5.2% in September to a seasonally adjusted annual rate of 1,221,000, the Census Bureau and HUD reported on October 20, from a revised 1,288,000 in August and 7.4% below September 2025; the consensus had been near 1.30 million. Single-family starts dropped 4.6% to 859,000, the lowest in a year though still 2.6% above a year earlier, and starts in buildings of five or more units were 349,000, 25.9% below September 2025. Building permits, the forward indicator, were almost unchanged at 1,400,000, down 0.2%, but single-family permits fell 4.0% to 845,000. The Census Bureau's own margin of error on the monthly change is ±11.8%, so the decline is indicative rather than certain.
At 10:00 a.m. the National Association of Realtors added the demand side. Its Pending Home Sales Index, which counts signed contracts on existing homes, fell 7.3% in September to 66.0 and was 11.3% lower than a year earlier; economists polled by Reuters had expected a decline of 0.5%. Every region fell, the West by 9.2%, the South by 8.2%, the Midwest by 6.5% and the Northeast by 4.2%, and several reports described the index level as the lowest since the series began in 2001. "Market conditions weakened in September due to fast-rising mortgage rates," said the association's chief economist, Lawrence Yun. The 30-year mortgage rate was quoted above 7.5% this week.
The builder survey on Monday had already said as much: the NAHB index fell to 29, its lowest since June 2012, with 43% of builders cutting prices. What Tuesday added is that the slowdown has reached the construction and contract data, not only sentiment, and that it is concentrated in single-family homes, the segment that responds most directly to mortgage rates. Multi-family starts have been falling for longer, as the apartment boom of 2022 and 2023 works through.
And yet the iShares Home Construction ETF rose 2.8% to $87.32 and the SPDR homebuilders ETF 2.2%, because the bond market read the data as a reason for yields to fall. The 10-year Treasury yield slipped two basis points to 5.12%, the long-bond ETF rose 0.8%, and the Russell 2000, where many smaller builders and building-products companies sit, gained 1.65%. Homebuilders trade on the direction of rates more than on the level of starts, and a bad housing print that pulls yields down is, perversely, good for them on the day.
The next housing data are existing-home sales on November 12 and the October starts report on November 18, after the Federal Reserve's October 28 decision. With builder sentiment at a 14-year low, starts at the second-lowest rate in two years and contracts at a record low, housing is now the clearest evidence that 5% Treasury yields are slowing something; the question for the Fed is whether that is enough while inflation is still above target.