By Harriet Torry and Kate Davidson 

Home building in the U.S. fell last month, showing that rising labor and material costs continue to hamper home construction.

Housing starts, a measure of new-home construction, fell 9.4% in September from the prior month to a seasonally adjusted annual rate of 1.256 million, the Commerce Department said Thursday.

Residential building permits, which can signal how much construction is in the pipeline, dropped 2.7% from August to an annual pace of 1.387 million.

Economists surveyed by The Wall Street Journal had expected a 3.2% drop in housing starts and a 6.3% decline for permits last month.

Housing-starts data are volatile from month to month and can be subject to large revisions. September's 9.4% decline for starts came with a margin of error of 9.4 percentage points.

Starts were up 1.6% from September last year and building permits were up 7.7% from the same month in 2018.

Despite historically low mortgage rates and rising wages, the housing sector has been strained by low inventory of affordable homes propelled by rising construction costs and lack of land.

Borrowing costs ticked up in September to just above 3.7% but have since receded. Average rates for 30-year mortgages fell to 3.57% last week, according to Freddie Mac.

At the same time, the National Association of Home Builders reported this week that builder confidence in the market for new single-family homes climbed in October to its highest level since February 2018.

The Commerce report can be found at http://www.census.gov/construction/nrc/pdf/newresconst.pdf

(END) Dow Jones Newswires

October 17, 2019 08:45 ET (12:45 GMT)