A report released by the Commerce Department on Wednesday showed a substantial rebound in new residential construction in the U.S. in the month of September.
The Commerce Department said housing starts spiked by 7.0 percent to an annual rate of 1.358 million in September after plunging by 12.5 percent to a revised rate of 1.269 million in August.
Economists had expected housing starts to jump to a rate of 1.380 million from the 1.283 million originally reported for the previous month.
“Despite the uptick in September, the level of homes under construction is likely too low for the growing number of millennials looking for housing,” said Jeffrey Roach, Chief Economist for LPL Financial.
Meanwhile, the report said building permits tumbled by 4.4 percent to an annual rate of 1.475 million in September after surging by 6.8 percent to a revised rate of 1.541 million in August.
Building permits, an indicator of future housing demand, were expected to decrease to a rate of 1.450 million from the 1.543 million originally reported for the previous month.
“Investors should know that the low supply of existing homes on the market provides a favorable backdrop for homebuilders amid low inventory,” said Roach.
He added, “Low supply of available homes on the market will likely keep prices elevated, despite the Fed’s efforts to cool the economy and suppress housing inflation.”
On Thursday, the National Association of Realtors is scheduled to release a separate report on existing home sales in the month of September.