Willow and Hearth

Housing starts fell 12.4% in July, dropping to a seasonally adjusted annual rate of 1.24 million units, according to newly released data from the National Association of Home Builders. Single-family construction, the category most relevant to homeowners planning a build, dropped 9.9% for the month and now sits 15.7% below where it stood a year ago.

Key Points

• Overall housing starts fell 12.4% to a 1.24 million-unit annualized rate, per NAHB’s July report.
• Single-family starts dropped 9.9% month-over-month to 808,000 units, and are down 15.7% year-over-year.
• Multifamily starts fell 16.8% for the month to 431,000 units, also down 8.9% from July of last year.
• Building permits, widely watched as a leading indicator of future construction activity, rose 5% overall to a 1.44 million-unit rate, with single-family permits up 2.5% and multifamily permits up 9.4%.
• NAHB points to elevated mortgage rates alongside rising material, gas, and diesel costs as the main drags on builder activity.

The pullback wasn’t even across the country. Year-to-date starts are up 11.7% in the Northeast, while the Midwest, South, and West are each running behind last year’s pace, down 4.5%, 3%, and 3.8% respectively, based on the same NAHB release.

NAHB Chairman Bill Owens said in the association’s statement that “higher mortgage rates are keeping prospective buyers sidelined while material and fuel costs increase construction expenses.” NAHB Assistant Vice President Danushka Nanayakkara-Skillington added that “the drop in single-family construction is especially concerning given the persistent housing shortage.”

What It Means If You’re Building or Renovating

A sharp drop in new-home starts doesn’t automatically make a renovation cheaper, but it can shift who’s available to do the work. When builders are breaking ground on fewer new houses, general contractors, framers, electricians, and plumbers who’d otherwise be tied up on subdivisions have more room on their calendars for remodeling and addition jobs. That can translate into shorter wait times for a quote and, in some markets, more room to negotiate on labor.

Material costs are a separate story. NAHB’s own explanation for the slowdown, rising material, gas, and diesel prices, means the inputs behind lumber, drywall, and transport aren’t necessarily getting cheaper just because fewer homes are being built. Anyone budgeting a kitchen remodel or a room addition should expect labor availability to loosen faster than material pricing does.

The 5% jump in permits is worth watching rather than celebrating just yet. Permits typically lead actual construction by a few months, so the increase, particularly the 9.4% multifamily gain, hints at some rebuilding in the pipeline. But a single month of permit growth after a steep drop in starts isn’t proof the slowdown has ended.

The underlying figures come from the Census Bureau’s monthly New Residential Construction survey, which NAHB and other housing economists use as the baseline for tracking building activity nationwide. The next monthly release will show whether July’s decline was a one-month stumble or the start of a longer slowdown for builders and, by extension, the contractors who depend on a healthy construction market.