Economic uncertainty continues to push builders to temper their expectations (and pace of construction) based on the latest monthly new residential construction report by the U.S. Census Bureau.
The Bureau’s report for July states that privately owned housing starts were at a seasonally adjusted annual rate of 1.24 million. This is a considerable decrease (12.4%) from June’s rate of 1.42 million and is down 13.5% from the same period last year (1.43 million).
On a national level, both single-unit and multifamily-unit (five units or more) housing starts decreased on a monthly and yearly basis. Bright MLS Chief Economist Lisa Sturtevant pointed to the significant decline for single-unit starts, which have faltered even as multifamily saw recent signs of an uptick.
“The U.S. Census Bureau reported today that new housing starts in July were lower than a year ago, with starts of single-family homes down 15.7% year-over-year and starts on units in buildings with five or more units falling by 7.1%,” Sturtevant said in a statement. “On a seasonally-adjusted annual basis, single-family starts are at their lowest level since November 2022.”
Previously, housing starts grew slightly in June, but this was primarily driven by a sharp increase in multifamily-units, which grew by 513,000. Now—on a seasonally adjusted basis—multifamily-unit starts fell by 15.6% to around 421,000 on a month-over-month basis.
Realtor.com® Senior Economist Anthony Smith noted in a statement that—given the irregular behavior for multifamily-units throughout May to July—it will “likely take another month or two of data to know where the segment’s true run rate has settled.”
Building challenges
Builders are hesitant to make dramatic moves in the given economic climate. In the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder sentiment only increased by one point for August, but still remains very low at 35 (on a scale from zero to 100).
“Builders continue to face significant challenges from elevated construction costs and affordability pressures,” NAHB Chairman Bill Owens said in a statement. “Higher mortgage rates are keeping many prospective buyers on the sidelines, while rising material, gas and diesel costs are adding to the cost of construction. These challenges are making it increasingly difficult for builders to deliver homes at prices that buyers can afford.”
Consumers have also been squeezed by affordability issues. In the latest consumer sentiment survey by the University of Michigan, consumer sentiment fell by 7.6% in the last month. Inflation fears and uncertainty surrounding conflicts in the Middle East are the main drivers for this drop, but all facets of the housing market seem to feel the economic strains.
“With all but the highest-end buyers moving cautiously amidst economic uncertainty and elevated mortgage rates, homebuilders are also holding back,” Sturtevant said.
Construction junction
Generally, each of the four major regions experienced some declines in construction starts. The Midwest experienced the sharpest drop in total housing starts by 27.1%, followed by the West at 13.8% and the South at 12.6%, all on a seasonally adjusted basis. The Northeast, however, is the only outlier with an increase to total housing starts, but this increase is disproportionate according to Smith.
“Regionally, the only monthly starts gain came from the Northeast, up 17.1%. However, the 27.1% monthly decline in single-family shows that the increase is being supported by the multifamily segment,” he said.
Housing starts aren’t the only element of the report to show slowing activity. Housing completions have slowed their pace amidst variable construction costs and builder fears. Nationally, housing completions were at a seasonally adjusted annual rate of 1.212 million, dropping about 9.1% month-over-month according to the report.
On a yearly basis, completions have also stalled and are 16.8% below July 2025’s rate of 1.456 million.
“On completions, the Northeast had the sharpest drop, down 57.6% for the month and 45.1% for the year, though this region’s completions data has been noisy for months,” Smith said. “The West was the only region to add completions month over month, up 14.6%, with single family completions up 19.0%, consistent with builders there working through a backlog in a market where for-sale inventory has already recovered past pre-pandemic norms.”
Despite July’s lackluster figures for housing starts and completions, privately-owned housing unit permits may indicate minor growth for construction progress in the coming months. For July, the rate of nationwide building permits increased by 5% since June, going from 1.37 million to 1.44 million on a seasonally adjusted basis.
Smith mentioned that the report’s data on building permits is at “the highest pace since February, with the Midwest leading the monthly gain at 12.3% and the Northeast posting the largest annual increase at 16.2%, both regions where inventory remains tight and new supply is needed most.”
While permitting is a good sign, economists agreed that building permits do not cleanly indicate how many housing starts will begin or reach completion. “Permits don’t always translate into starts, however, and builders and developers will be responding to economic conditions as we head into fall,” Sturtevant said.
Smith echoes this sentiment in his statement, where he stated that the units authorized but not yet started has “climbed to 279,000 in July, the largest backlog in over a year, while units under construction fell to 1,262,000, down 6.0% year over year.”
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