Residential construction continued to lag in July, with total housing starts dropping for the fifth straight month and single-family building sinking to a 16-month low.
According to the latest Monthly New Residential Construction report from the U.S. Census Bureau and the Department of Housing and Urban Development, privately owned housing starts during July came in at a seasonally adjusted annual rate of 1.2 million units. That’s down 6.8% month over month and 16% year over year, as interest rate issues, high material prices and ongoing labor woes remain in play, holding the market back.
“The decline in new home construction mirrors our latest builder surveys, which show that buyers remain concerned about challenging affordability conditions and builders are grappling with elevated rates for builder loans, a shortage of workers and lots, and supply chain concerns for some building materials,” said Carl Harris, chairman of the National Association of Home Builders (NAHB). As Harris alluded, the NAHB/Wells Fargo Housing Market Index, which tracks builder confidence in the new-home market, is down two points from July, falling to its lowest reading since December.
Single-family starts, in particular, are down 14.1% from June, falling to a seasonally adjusted annual rate of 851,000 units. That’s the slowest pace since March 2023. Year to date, however, single-family starts are still up 11.4%.
Homebuilding was likely weakened by Hurricane Beryl, which ravaged the Gulf Coast in late June and early July. As a result, residential construction plummeted 22.9% in the South, where most homes are built. Starts also plunged in the Northeast (by 27.1%) and ebbed in the West (by 1.4%), though the Midwest saw a construction pickup of 16.8%.
Permits are down, too, dropping 4% monthly and 7% annually. Single-family permitting was down just 0.1% from June, though it has slowed by 9% from its 2024 peak.
The meager pullback in single-family authorizations was much smaller than those of recent months, perhaps suggesting that the streak of tempered building may soon turn a corner. Robert Dietz, the NAHB’s chief economist, noted that, as with the rest of the housing market, an expected fall cut to the Federal Reserve’s benchmark interest rate should give home construction a boost.
“Better inflation data points to the Federal Reserve moving to cut interest rates possibly as early as September, and with interest rates expected to moderate in the months ahead, this will help both buyers and builders who are dealing with tight lending conditions,” he said.
