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U.S. home construction fell 5.3 per cent in September, a sign that recent hurricanes and rising mortgage rates may be weighing on the market.

The Commerce Department said on Wednesday that housing starts slipped last month to a seasonally adjusted annual rate of 1.2 million, down from 1.27 million in August. So far this year, starts have increased 6.4 per cent.

But the pace of home building has downshifted since May. The number of ground-breakings in September was also likely hurt by Hurricane Florence striking North Carolina – and ground-breakings could be depressed in October after Hurricane Michael hit the U.S. southeast hard.

“Starts are stagnating as the housing market slows, though September’s numbers were suppressed by the hurricane affecting the Carolinas,” said Tendayi Kapfidze, chief economist at Lending Tree, an online loan broker.

Home buyers are facing new cost pressures that could be dampening demand.

Mortgage buyer Freddie Mac says that the average 30-year fixed-rate mortgage jumped to 4.9 per cent last week, the highest level since 2011. The combination of higher borrowing costs and rising home values has made home ownership less affordable.

“It may be tempting to draw national conclusions from these storm-related dips and rallies, but the regional blips can’t obscure the year-long malaise in the national single-family home construction market: Starts have been hit or miss, sales flat and permits trending downward for months,” said Aaron Terrazas, a senior economist at the real estate firm Zillow.

After the Commerce Department released the report, shares in home builders and building-materials retailers dropped on Wednesday. Shares for the building companies Lennar, PulteGroup and D.R. Horton were down by more than 2 per cent in afternoon trading, while shares in Home Depot and Lowe’s slumped more than 3 per cent.

Builders appear to be adapting to the affordability challenges. Starts for multifamily buildings such as apartments have increased at a faster clip than single-family houses year to date.

Still, much of September’s decline came from a decline in ground-breakings for multifamily buildings.

Housing starts fell last month in the South and Midwest, but they increased in the Northeast and West. The construction data can be volatile, so the regional levels of home building can change sharply on a monthly basis.

Permits, an indicator of future activity, fell 0.6 per cent to an annual rate of 1.24 million.

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