The U.S. experienced a notable decline in new residential construction in July, according to the latest report from the Commerce Department released on Friday.
The report reveals that housing starts plummeted by 6.8% in July, falling to an annual rate of 1.238 million. This follows a 1.1% increase in June, which brought the revised rate to 1.329 million.
Economists had predicted a milder decline of 1.7%, anticipating an annual rate of 1.330 million from the previously reported 1.353 million in June.
This sharp decrease brings housing starts to their lowest level since May 2020, when the annual rate was at 1.053 million.
Leading this downturn, single-family housing starts plunged by 14.1% to an annual rate of 851,000 in July, following a slight 0.1% decline to a rate of 991,000 in June.
Conversely, multi-family starts surged by 14.5% to an annual rate of 387,000 in July after a 4.6% rise to 338,000 in June.
The Commerce Department also reported a significant drop in building permits, down 7.0% to an annual rate of 1.396 million in July from a revised rate of 1.454 million in June, which had seen a 3.9% increase.
Building permits, a key indicator of future housing demand, were expected to fall by 1.1% to an annual rate of 1.430 million from the originally reported 1.446 million in June.
Breaking it down, single-family permits decreased marginally by 0.1% to an annual rate of 938,000, while multi-family permits dropped sharply by 11.1% to an annual rate of 458,000.
Commenting on the report, Nationwide Economist Daniel Vielhaber noted that, "Compared to history, this pace is not slow, but it's also not fast." He remarked that while permits for single-family homes remain solid, they have significantly declined since earlier this year, and the pace of multi-family starts is average.
Vielhaber added, "Home builder sentiment declined for a fourth straight month in August to an eight-month low, suggesting we could see further weak home builder data in coming months."
Additionally, the National Association of Home Builders released a separate report on Thursday, showing an unexpected continued decline in U.S. homebuilder confidence in August.
According to the report, the NAHB/Wells Fargo Housing Market Index fell to 39 in August from a downwardly revised 41 in July.
This decline surprised economists, who had anticipated the index would slightly increase to 43 from the initially reported 42 in July.
Marking its fourth consecutive monthly decline, the housing market index reached its lowest point since last December, when it was at 37.
