U.S. Housing Starts Tumble on Weak Multi-family Construction Activity

Workers construct a new home in Leyden Rock in Arvada, Colorado, U.S. August 30, 2016.   REUTERS/Rick Wilking/File Photo

U.S. housing starts tumbled to a 1-1/2-year low in September amid a steep decline in the construction of multifamily homes, but a surge in the construction of single-family units pointed to sustained strength in the housing market.

Groundbreaking dropped 9.0 percent to a seasonally adjusted annual pace of 1.05 million units, the lowest level since March 2015, the Commerce Department said on Wednesday. August's starts were revised up to a 1.15 million-unit pace from the previously reported 1.14 million-unit rate.

Single-family home building, which accounts for the largest share of the residential housing market, jumped 8.1 percent to a 783,000-unit pace in September, the highest level since February.

Economists polled by Reuters had forecast housing starts rising to a 1.18 million-unit pace in September. Last month's drop left the overall housing starts in the third quarter well below their average for the second quarter.

That suggests residential construction remained a drag on gross domestic product in the third quarter after subtracting from output in the April-June period.

Housing starts for the volatile multi-family segment plunged 38.0 percent to a 264,000-unit pace in September. But with rents rising at their fastest pace in 10 years, last month's drop is likely to be temporary.

Overall home building activity is likely to rebound in the coming months, as permits for future construction surged 6.3 percent in September. Single-family permits edged up 0.4 percent last month. Building permits for multi-family units soared 16.8 percent in September.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)