New housing construction in the U.S. declined in July, while the start of single-family home construction fell to its lowest level since 2022. According to federal government data released on Tuesday, the start of housing construction last month fell by 12.4% to an annual rate of 1.24 million units, below the 1.35 million forecasted by economists surveyed by Bloomberg.
The start of single-family home construction decreased by 9.9% to an annual rate of 808,000 units, the weakest result since November 2022. The start of multi-family home construction fell by nearly 17%, partially offsetting the sharp increase of the previous month. This decline indicates that the housing market has yet to gain momentum.
Factors affecting the housing market
Mortgage rates, which rose after the start of the war in Ukraine, and high housing prices continue to weigh on demand. Although investments in housing construction contributed to economic growth in the second quarter for the first time since 2022, their contribution was modest. The outlook for new housing construction remains uncertain.
The total number of building permits increased by 5%, reaching the highest level since February, which may indicate a revival of construction activity in the coming months. The number of permits for single-family home construction rose to a four‑month high, according to federal data. However, a recent Bloomberg Intelligence survey showed that 70% of investment professionals expect a decline in single-family home construction volumes this year.
The start of housing construction declined in the South, Midwest, and West of the U.S. Construction activity improved in the Northeast due to multi‑family projects. The American home‑improvement retail chain Home Depot Inc. exceeded expectations in the last quarter as customers continued to spend on smaller projects. However, Chief Financial Officer Richard McPhail stated that the housing market has not yet recovered, and large‑scale home renovation and furnishing projects remain virtually frozen.
The government report also showed that the total number of completed housing units, as well as completed single-family homes, fell to the lowest level since 2020. Data on new housing construction is volatile, and according to government estimates, with a 90% probability, the actual monthly change ranged from a decline of 2.9% to a decline of 21.9%. Separately, the National Association of Realtors will release its July report on pending home sales on Tuesday.
Source: Bloomberg
