The numbers: Construction on new U.S. homes fell a seasonally adjusted 9.6% in July to 1.45 million, the Commerce Department said Tuesday.
The level of starts in July since February 2021.
Economics polled by the Wall Street Journal expected housing starts to drop to a 1.52 million rate from June’s initial estimate of 1.56 million.
The annual rate of total housing starts fell from 8.1% from the previous year.
In June, housing starts were revised to an increase of 2.4% of 1.56 million, as compared to a previous drop of 2%.
Building permits for new homes fell 1.3% to 1.67 million in July. Economists expected building permits to fall to a 1.63 million rate from June’s initial estimate of 1.7 million.
Key details: The construction pace of single-family homes fell 10.1% in July and apartments fell 10%.
Regionally, construction of homes surged in the Northeast by 65.5% but fell in the Midwest, South and West.
Single-family construction in the Northeast led the jump with a 60.4% increase, followed by the West, with a 8.7% increase.
Big picture: Even though the country is facing a housing shortage, according to some experts, macroeconomic conditions have hit the brakes on new construction.
The rapid rise in mortgage rates and higher costs have cooled buyer demand as monthly payments tick up. Builders are consequently seeing a slowdown in business, which is pushing them to scale back construction.
The drop in housing starts in July follows weak sentiment expressed by home builders last month. Builders expressed further gloom in August, which hints at further declines in the housing sector.
In July, home builders reported their lowest sales activity in seven years, outside of the pandemic months of April to May 2020.
Market reaction: U.S. stocks
were set to open higher early Tuesday after earnings from large retailers. The yield on the 10-year Treasury note
rose slightly to 2.83%.