Construction of new homes slowed in September on a sharp drop in building of apartments, according to US government data released Tuesday.

Housing projects started last month fell 1.6 percent compared to August to an annual rate of 1.55 million units, seasonally adjusted, the Commerce Department reported.

But while single-family homes were unchanged last month, highly volatile starts for multi-family units plunged 5.5 percent, according to the report.

Low mortgage rates during the Covid-19 pandemic drove a surge in home sales, but sales have cooled off the frenzied pace earlier in the year as home prices shot up.

Even so, the real estate market faces a shortage of homes amid struggles to get building supplies and workers.

"Strong demand, sparse inventory and upbeat homebuilder sentiment should support new home construction around the current pace in the fourth quarter," said Nancy Vanden Houten of Oxford Economics.

Construction started on multi-family buildings in the US real estate market dropped in September, according to official data Construction started on multi-family buildings in the US real estate market dropped in September, according to official data Photo: GETTY / GEORGE FREY

But she cautioned that "the pace of activity will continue to be tempered by supply chain snags and difficulties finding qualified workers."

Even with the latest drop, housing starts remain 7.4 percent higher than September 2020, while apartment construction is 38.2 percent higher, according to the report.

The results were starkly different by region, with a double-digit drop in the Northeast and a double-digit increase in the West.

Permits issued for new home projects, a volatile indicator of building in the pipeline, fell 7.7 percent last month to 1.6 million, with a 21 percent drop in the multi-family sector.

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