July brought a sharp decline in construction of new single-family homes across the U.S., but new permits show some signs of hope.
July brought a sharp decline in construction of new single-family homes across the U.S., but new permits show some signs of hope on the horizon.
Single-family housing starts last month were at a seasonally adjusted annual rate of 808,000 in July, which is 9.9% below June and 15.7% below that month last year, the U.S. Census Bureau reported Tuesday. Multi-family housing starts, which are more volatile, settled back after a June surge.
This dropped total housing starts to 1,239,000 in July. That's down 12.4% from June and 13.5% down from July 2025.
This month's housing market indicators portray a rate-challenged housing market where builders are struggling to maintain good margins and buyers are scarce. But all sides have some optimism that relief could be in sight long-term.
“The July decline in housing starts reflects broader weakness in the housing market,” said Danushka Nanayakkara-Skillington, who leads forecasting and analysis at the National Association of Home Builders. “Builders remain cautious as elevated mortgage rates, rising construction costs and economic uncertainty continue to limit demand."
Every region saw declines in new privately-owned housing starts, led by a 27.1% decline in the Northeast, and a 13.8% decline in the West. Even the Midwest and the South, bright spots of the housing market this year, posted declines of 5% and 4.9%.
"For buyers, the near-term picture hasn't changed," Realtor.com Senior Economist Anthony Smith said. "Builders still have finished inventory to move and continue offering price cuts and incentives, especially in Southern and Western markets where new home supply has grown fastest."
Buyers on the sidelines
Overall, About 1,443,000 building permits were issued nationwide in July, which is 5% above where they were in June and 3.1% above the July 2025 rate. Since it usually takes a few months for a permitted home to start construction, that could hint at some optimism that demand will pick up heading into the cooler months.
The 30-year fixed-rate mortgage has been on a steady upward trajectory and hit 6.67% Aug. 13, just a bit down from its 2026 high earlier in the month, according to Fannie Mae. That heightened rate has kept the housing market locked in place and left many buyers and sellers on the sidelines.
(Realtor.com) The the latest National Association of Home Builders/Wells Fargo Housing Market Index, released Monday, found builders were still low on confidence based on sales expectations and prospective buyer traffic. But they had somewhat better views of current sales conditions.
Josh Hirt, senior economist at financial services firm The Vanguard Group, noted consumer spending benefits from elevated household wealth, but inflation cuts into that growth and could end up being a liability as Americans soften their spending in the second half of the year.
"Inflation continues to be distorted by measurement issues and temporary factors," Hirt said Tuesday. "As a result, we expect the Federal Reserve to remain on hold, with risks increasingly skewed toward additional tightening should inflation fail to moderate or labor market conditions remain firm.
Said Smith, the market's underlying fundamentals might take longer to correct.
"The longer-term concern remains the one we keep coming back to," Smith said. "A shortage of roughly 4 million homes doesn't close on a shrinking pipeline, and the growing stack of permitted but unstarted units is a reminder that builders need to see real demand before they're willing to build into it."