US Housing Starts MoM: September 2025 Release and Macro Implications
Key Takeaways: The US housing starts contracted by 8.50% MoM in September 2025, sharply missing the -3.40% consensus. This marks a notable reversal from August’s 5.20% gain and continues a volatile pattern observed over the past nine months. The decline reflects tightening financial conditions, elevated mortgage rates, and cautious builder sentiment amid persistent inflation and geopolitical uncertainties. While the housing sector faces headwinds, fiscal support and easing inflation could stabilize activity in 2026. Market reactions were swift, with Treasury yields and the USD adjusting to the weaker print. Forward scenarios range from a mild recovery to a deeper slowdown depending on monetary policy and external shocks.
Table of Contents
The latest US Housing Starts MoM data, released on September 17, 2025, showed a sharp contraction of -8.50%, well below the consensus estimate of -3.40% and reversing August’s 5.20% increase. This data, sourced from the Sigmanomics database, highlights ongoing volatility in residential construction amid a complex macroeconomic backdrop.
Drivers this month
- Mortgage rates remain elevated near 7%, dampening buyer affordability.
- Builder confidence declined amid rising input costs and supply chain delays.
- Regional disparities: Northeast and West saw sharper declines compared to the South.
Policy pulse
The Federal Reserve’s recent rate hikes continue to weigh on housing demand. The current contraction aligns with the Fed’s inflation-targeting stance, as housing activity cools to moderate price pressures.
Market lens
Immediate reaction: US 2-year Treasury yields fell 5 basis points, while the USD Index weakened 0.30% within the first hour post-release, reflecting expectations of a slower Fed tightening cycle.
Housing starts are a critical leading indicator for the US economy, closely tied to consumer spending, employment, and GDP growth. The September print of -8.50% MoM contrasts with the 12-month average growth of approximately 0.30% and follows a volatile pattern over the past year.
Historical comparisons
- January 2025 saw a robust 15.80% surge, the highest in the past year.
- April 2025 experienced a steep -11.40% drop, reflecting early signs of tightening financial conditions.
- June 2025 also declined by -9.80%, underscoring persistent headwinds.
Monetary policy & financial conditions
The Federal Reserve’s aggressive rate hikes since late 2024 have pushed mortgage rates above 7%, the highest since 2000. This has increased borrowing costs, reducing affordability and slowing new home construction.
Fiscal policy & government budget
Federal infrastructure spending and housing subsidies have provided some support, but these measures have yet to offset the drag from higher rates and inflation. Budget constraints at state and local levels also limit new housing projects.
Regional trends
- The Northeast contracted by 12%, the largest regional drop.
- The South showed resilience with a modest -3% decline.
- The West and Midwest fell by 9% and 7%, respectively.
This chart signals a sector under pressure, trending downward after a brief summer rebound. The volatility suggests builders are reacting quickly to financial conditions and input cost fluctuations, with downside risks prevailing in the near term.
Market lens
Immediate reaction: The US dollar weakened against major currencies, while 2-year Treasury yields dropped, signaling market expectations for a slower pace of Fed hikes or a potential pause.
Looking ahead, housing starts face a mixed outlook shaped by monetary policy, inflation trends, and geopolitical risks. The sector’s trajectory will influence broader economic growth and financial markets.
Bullish scenario (20% probability)
- Inflation eases faster than expected, allowing the Fed to pause rate hikes.
- Mortgage rates decline below 6.50%, boosting affordability.
- Fiscal stimulus targeted at affordable housing accelerates construction.
Base scenario (55% probability)
- Gradual inflation decline keeps rates elevated near current levels.
- Housing starts stabilize with modest growth of 1-3% MoM by mid-2026.
- Supply chain improvements reduce input cost pressures.
Bearish scenario (25% probability)
- Inflation remains sticky, forcing further Fed tightening.
- Mortgage rates rise above 7.50%, further curbing demand.
- Geopolitical shocks disrupt supply chains, increasing costs.
External shocks & geopolitical risks
Ongoing tensions in global trade and energy markets could exacerbate cost pressures. Any escalation could delay construction and depress housing starts further.
The September 2025 housing starts data underscores the fragility of the US residential construction sector amid tightening financial conditions and elevated costs. While the sharp MoM decline is concerning, the sector’s inherent volatility and policy support offer some hope for stabilization. Market participants should monitor mortgage rates, Fed signals, and fiscal initiatives closely. The housing market remains a key barometer for the broader economy, influencing consumer spending and labor markets.
Key Markets Likely to React to Housing Starts MoM
Housing starts data typically impacts interest rate-sensitive sectors and currencies. The following tradable symbols historically track or react to US housing activity:
- ITB: US Home Construction ETF, directly linked to housing starts trends.
- USDCAD: Sensitive to US economic data and commodity prices affecting construction costs.
- PHM: PulteGroup, a major homebuilder whose stock reflects housing market health.
- BTCUSD: Bitcoin often reacts to macroeconomic shifts and risk sentiment changes.
- EURUSD: Reflects USD strength shifts following US economic releases.
FAQs
- What does the US Housing Starts MoM figure indicate?
- The Housing Starts MoM measures the monthly percentage change in new residential construction projects, signaling builder activity and economic health.
- How does the latest housing starts data affect monetary policy?
- Weaker housing starts may reduce inflationary pressures, potentially influencing the Federal Reserve to slow or pause interest rate hikes.
- Why is housing starts data important for investors?
- Housing starts impact sectors like construction, materials, and financial markets, serving as a leading indicator for economic growth and consumer demand.
Takeaway: The sharp September decline in US housing starts highlights ongoing headwinds from high rates and costs. Monitoring policy shifts and inflation trends will be key to anticipating the sector’s recovery path.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The September 2025 housing starts MoM contraction of -8.50% contrasts sharply with August’s 5.20% and the 12-month average near 0.30%. This reversal highlights the sector’s sensitivity to rising mortgage rates and supply chain disruptions.
Over the past nine months, housing starts have oscillated between strong rebounds and steep declines, reflecting uncertainty in builder sentiment and consumer demand. The current print is the third significant negative monthly change this year, following February (-9.80%) and April (-11.40%).