Continuing challenges within the labor and supply chains held down July housing starts to a seasonally adjusted annual rate of 1.53 million units, according to new data from the U.S. Census Bureau and Department of Housing and Urban Development.

That’s down 7.0% from the revised June pace of 1.65 million. Single-family starts fell 4.5% to a rate of 1.11 million, while multifamily starts declined 13.1% to a 423,000-unit rate.

“The latest starts numbers reflect declining builder sentiment as they continue to grapple with high building material prices, production bottlenecks and labor shortages,” said Chuck Fowke, chairman of the National Association of Home Builders (NAHB). “Policymakers need to prioritize the U.S. supply chain for items like building materials to ensure builders can add additional inventory the housing market desperately needs.”

Permitting grew 2.6% to a seasonally adjusted annual rate of 1.64 million, though that increase was driven chiefly by the multifamily sector. Multifamily permits are up 11.2% from June, reaching an annualized rate of 587,000; single-family authorizations, on the other hand, are down 1.7% month over month to 1.05 million units. Recent easing in lumber prices appears to have driven activity in multifamily building of late, although that movement has yet to spread to single-family construction.

“The decline in single-family permits indicates that builders are slowing construction activity as costs rise,” said Danushka Nanayakkara-Skillington, the NAHB’s assistant vice president of forecasting & analysis. “Starts began the year on a strong footing, but in recent months some projects have been forced to pause due to both the availability and costs of materials.”

Mike Fratantoni, senior vice president and chief economist at the Mortgage Bankers Association (MBA), noted that while single-family permits fell, they remain higher than they were at this time last year and are still higher than the level of starts, suggesting an increase in actual building in the near-term — especially is supply chain constraints do loosen.

And single-family starts, while down from June, are almost 12% higher than last year, Fratantoni observed. Overall, housing starts are up 2.5% from July 2020.

“There are now almost 690,000 single-family homes under construction – the largest number since 2007,” Fratantoni said. “This is clearly a positive sign given the remarkably low levels of inventory on the market.”