New residential construction pulled back in July as builders continued to feel the effects of high interest rates.
Housing starts fell 6.8% from the previous month to a seasonally adjusted annual pace of 1.238 million units, according to data from the Census Bureau released Friday, marking a four-year low. Single family housing starts dropped 14.1% to a seasonally adjusted annual pace of 851,000.
The data comes as mortgage rates have been on a downward trend in recent weeks but remain high relative to the period immediately following the start of the pandemic, keeping many buyers and sellers on the sidelines.
Meanwhile, housing inventory is also rising.
“The slump in both housing starts and building permits in July, to the lowest levels since the epoch of the pandemic, only partly reflects the temporary impact of Hurricane Beryl,” Paul Ashworth, chief economist at Capital Economics, wrote after the release.
“Accordingly, even though lower interest rates should provide ongoing support to new home sales, the existing oversupply in some regional markets could be a bigger constraint that we previously anticipated,” the economist added.
Friday’s data showed that building permits for single family homes also declined last month, slipping 0.1% month over month to 938,000. Meanwhile, permits for multifamily came in at a rate of 408,000 in July.
In August, homebuilder confidence hit the lowest level since December as high interest rates and record home prices continue to reduce demand for new homes.