Housing starts drop 12.4% in July, but permits rise 5%
Builders broke ground at a 1.24 million annual pace, well below forecasts, and single-family starts hit their lowest rate in at least a year. Permits for future construction moved the other way.
By American Policy WireFiled
The bottom line Fewer homes broke ground in July than at any point this year except May, which means less new supply later, even as permits point to a pickup.
Homebuilders told their trade group on Monday that their mood had improved by a single point. On Tuesday the government’s count showed what they did in July: they started homes at a 1,239,000 annual pace, down 12.4% from June and 13.5% below a year earlier [1, 4].
Why it matters: New construction is the main source of added housing supply. Economists polled by Reuters had expected about 1.35 million starts, so July missed by roughly 110,000 units at an annual rate [2]. Permits, the paperwork that comes before a shovel hits the ground, rose instead, which leaves the direction of the next few months unsettled [1].
By the numbers
- 808,000: The annual rate of single-family starts, down 9.9% from June and 15.7% from July 2025 [1]. That is the lowest monthly single-family rate in the Census Bureau’s table, which runs back to July 2025 [1].
- 421,000: Starts in buildings with five or more units, down from 499,000 in June [1].
- 1,443,000: Total permits, up 5.0% from June and 3.1% from a year earlier, beating the 1.37 million Reuters’ poll expected [1, 2].
- 1,262,000: Units under construction, 6.0% fewer than a year earlier. Single-family homes under construction fell 7.2% to 579,000 [1].
- 6.67%: Freddie Mac’s 30-year fixed average on Aug. 13, up from 6.58% a year earlier; the 15-year was 5.96% [5].
How the year has gone: July’s drop follows a choppy spring. Total starts ran at 1,522,000 in March, fell to 1,182,000 in May and bounced back to 1,415,000 in June before sliding again [1]. Single-family starts peaked at 1,017,000 in March and have stayed between 889,000 and 914,000 from April through June, which makes July’s 808,000 a clear break from that range [1]. Apartment building has swung harder than houses all year, and July’s permits for buildings with five or more units rose to 490,000 [1].
Where the drop showed up: Three of four regions fell. Starts dropped 27.6% in the Midwest, 13.8% in the West and 12.6% in the South, while the Northeast rose 17.1% [1]. For the year through July, total starts are 2.0% behind 2025 on an unadjusted basis, and single-family starts are 6.9% behind [1].
The pipeline is thinning at the other end too. Completions fell to a 1,212,000 annual rate, 16.8% below July 2025 [1]. Another 279,000 units had permits but no foundation yet, 10.3% more than a year earlier [1].
Why builders pulled back: Reuters attributed the single-family slide to higher mortgage rates and a stock of unsold new homes [2]. The National Association of Home Builders blamed “economic uncertainty, rising construction costs, labor shortages and elevated financing expenses” [3]. Borrowing costs have risen this summer: the 30-year average climbed from 6.43% on July 2 to 6.67% by mid-August [5]. We noted the buildup of unsold new homes in late July.
What it means for buyers and owners:
- Builders are discounting. In NAHB’s August survey, 35% of builders reported cutting prices, down from 37% in July, with an average cut of 6%; 63% offered incentives [4].
- Fewer finished homes ahead. With completions and units under construction both below last year’s levels, the supply of brand-new homes reaching the market is shrinking [1].
- Traffic is thin. NAHB’s gauge of prospective buyer traffic stayed at 23 in August, unchanged from July [4].
- Rates are set elsewhere. A weak construction report does not move mortgage quotes directly; the Fed held its target range at 3.50% to 3.75% on July 29, with three officials voting for a hike [6].
What’s next: The Census Bureau and HUD publish August construction figures on Sept. 17 [1]. Freddie Mac’s next weekly rate survey comes Thursday [5].
The other side: One month may overstate the slump. The agencies say it can take six months to establish a trend in starts, and the monthly single-family decline falls inside the survey’s margin of error, at 9.9% plus or minus 10.4% [1]. NAHB’s three-month average for single-family starts was 865,000, well above July’s single reading [3]. Builders’ confidence index rose to 35 in August from 34, and Reuters described their confidence as “significantly subdued” [2, 4]. Whether July’s jump in permits turns into starts this fall is the open question.
Q&A Quick answers
- Q1How many housing starts were there in July 2026?
- Builders started homes at a seasonally adjusted annual rate of 1,239,000 in July, 12.4% below June's revised 1,415,000 [1]. Economists polled by Reuters had expected about 1.35 million [2].
- Q2Did single-family housing starts fall in July 2026?
- Yes, by the government's estimate: single-family starts fell 9.9% to an 808,000 annual rate and were 15.7% below July 2025 [1]. The Census Bureau says the monthly change is within its margin of error [1].
- Q3Are building permits going up?
- Total permits rose 5.0% in July to a 1,443,000 annual rate, and single-family permits rose 2.5% to 894,000 [1]. Permits came in above the 1.37 million economists expected, Reuters reported [2].
- Q4Are homebuilders cutting prices in August 2026?
- In NAHB's August survey, 35% of builders said they cut prices, with an average reduction of 6%, and 63% used sales incentives [4].
- Q5When is the next housing starts report?
- The Census Bureau and HUD will publish August figures on September 17, 2026 [1].