June construction activity was a mixed bag, the U.S. Census Bureau and Department of Housing and Urban Development revealed Friday, with multifamily housing starts surging but single-family units falling even further behind May’s slackening pace.

Overall housing starts rose 4.6% month over month but fell 0.5% year over year in June to a seasonally adjusted annual rate of around 1.32 million units. Single-family starts of 883,000 units were 4.6% below May’s revised figure of 926,000 units.

But multifamily construction starts for buildings with five or more units spiked 30.6% to 414,000 units from May’s revised mark of 317,000. It represents a complete reversal from May, when multifamily starts fell 30.4% month over month.

“Elevated homeownership costs continue to weigh on buyer demand and discourage new single-family construction,” a team of Wells Fargo economists wrote in an analysis. “Meantime, affordability challenges are boosting rental demand and supporting a turnaround in multifamily development.”

On the permitting side, an estimated 1.4 million building permits were issued on a seasonally adjusted annual basis in June for both single-family and multifamily projects, which is 0.2% more than May but 4.4% below June 2024’s rate. Single-family permits clocked in 3.7% lower in June compared to the prior month.

First American Deputy Chief Economist Odeta Kushi observed that “the continued decline in single-family permits, combined with weakened builder sentiment, points to a slowdown in future single-family construction.” She believes that home builder sentiment — which has been in negative territory for 15 consecutive months, according to Housing Market Index (HMI) data — signals “underlying weakness in the single-family sector.”

“Affordability challenges and tariff uncertainty continue to weigh on demand,” Kushi stated. “Builders are not only facing growing competition from the resale market, but also grappling with elevated inventories of their own.”

The HMI survey data, released Thursday by the National Association of Home Builders (NAHB) and Wells Fargo, showed that 38% of builders reported price cuts on newly built homes in July, which is the highest percentage since NAHB began tracking that monthly figure in 2022.

Kushi noted that while price cuts are often seen as a “last-resort incentive,” they have “become increasingly necessary in today’s market to offset affordability challenges.”