Housing starts fell more than expected, sliding by 5.3% to a seasonally adjusted annual rate of 1.201 million units last month, according to the latest data from the Commerce Department.
The fall nailed homebuilder ETFs like the iShares US Home Construction ETF (BATS: ITB), SPDR S&P Homebuilders ETF (NYSEArca: XHB) and the Invesco Dynamic Building & Construction ETF (NYSEArca: PKB).
ITB was down 3.38%, XHB fell 2.81% and PKB dropped 3% as of 11:30 a.m. ET. The drop in housing starts was also paired with August’s data being revised down to show starts rising to a rate of 1.268 million units versus the previously reported 1.282 million units.
“Contractors are paying more for the materials they use and workers they employ but aren’t able to pass most of those new costs on to their clients,” said Ken Simonson, chief economist for the group, the Associated General Contractors of America.
Related: Senior Loan ETFs Bolstered by Solid Economic Numbers
Partly to blame for the rise in building materials is the tariff battle between the United States and China, which has increased the cost of homebuilding. Tariffs have elevated the costs of construction–materials like lumber, steel and aluminum as well as U.S. tariffs on $200 billion in Chinese imports like countertops and furniture could increase construction costs 20% to 30%.