New home construction in the U.S. fell in July to the lowest level since the aftermath of the pandemic, as builders respond to weak demand that keeps inventory levels high.
Total new housing starts fell 6.8% to 1.2 million on an annual basis last month, dragging down the biggest drop in single-family homes since April 2020, government data released Friday showed. A significant drop in the south may have reflected the impact of Hurricane Beryl.
The overall starting figure was lower than all estimates in a Bloomberg survey of economists.
The new construction sector has lost some of its luster in recent months after a strong start to the year, as a combination of still high mortgage rates and prices deters many potential buyers. That has pushed inventories to their highest level since 2008 and prompted builders to scale back construction.
Nevertheless, especially large builders such as Lennar Corp. and PulteGroup Inc. have managed to gain market share from their smaller counterparts – in part because they have access to cheaper capital – and have boosted sales by lowering prices and buying out customers’ mortgage interest.
However, traders are now opting for quick and steep rate cuts as data this week suggested the economy is much more resilient than markets expected.
Building permits, which indicate future construction, fell 4% to 1.4 million year-on-year. Applications for single-family home construction fell to the lowest level since May 2023, while permits for multifamily projects fell by more than 11%.
Starts fell in three of the four regions, including steep declines in the West and South, which fell to the lowest levels since May 2020.
The Commerce Department report also shows that the number of single-family home completions rose to a three-month high and remains well above pre-pandemic trends.
Housing starts figures are volatile and the government report shows that 90% are confident that the monthly change ranges from a decline of 17.1% to a gain of 3.5%.