The Atlanta Fed cut its third-quarter GDP tracking estimate to 3.5% from 3.6%, according to the GDPNow model update.
A tenth of a point is routine model maintenance, not a signal. GDPNow moves mechanically with each new data print.
The cut landed on a morning stacked with weak housing numbers. Housing starts fell 5.2% in September to 1.22M annualized units, missing the 1.3M estimate for the third straight month.
Single-family starts dropped 4.56% to 859K annualized, the lowest since September 2025. Building permits slipped 0.2% to 1.4M units, slightly above expectations.
Goldman Sachs kept its own third-quarter GDP tracking estimate at 3.3% on a quarter-over-quarter annualized basis despite the housing drop.
| Indicator | Level | Monthly change |
|---|---|---|
| Housing starts | 1.22M annualized units | -5.2% |
| Single-family starts | 859K annualized units | -4.6% |
| Building permits | 1.400M annualized units | -0.2% |
| NAHB builder sentiment (Oct) | 29 index | -3 points |
Mortgage rates near 7.5% froze the market
The average 30-year fixed mortgage rate climbed roughly 70 basis points during September, from 6.8% at the start to 7.5% by month-end.
Pending home sales, a count of signed contracts, fell 7.3% from August and 11.3% year over year. The weekly average rate hit 7.28% by the end of September, pulling pending sales lower in all 50 of the most populous US metros.
Builder confidence tells the same story. The National Association of Home Builders/Wells Fargo index dropped three points to 29 in October, the weakest reading since June 2012 and below the consensus forecast of 31. Readings under 50 mean more builders see poor conditions than good.
"Housing remains squeezed by supply-side constraints and significant affordability challenges."
Robert Dietz, National Association of Home Builders
Housing is a direct drag on growth
Residential construction has dragged on economic growth in five of the past six quarters,. Before the latest housing starts report, GDPNow projected residential investment would contract at a 1.3% annualized rate in Q3.
Single-family permits fell to their lowest level since early 2023, while single-family completions hit the weakest pace in more than six years. Both future supply channels are shrinking at once.
Nationwide Financial's senior economist Ben Ayers expects home construction to stay moribund into 2027, with builders cutting prices to clear existing projects.
The Federal Reserve meets Oct. 27 and 28 with housing subtracting from output and headline inflation at 3.7%. Growth above 3% gives the committee room to wait, which is why one tenth off the tracker changes little on its own.
