What happened
New residential construction activity provided mixed signals in July, with starts rising on both a month-over-month and year-over-year basis, but permits and completions falling compared to last year at this time. Homebuilding has been relatively slow this year, as concerns surrounding tariffs combined with depressed buyer demand has builders taking a cautious approach. Permits, the most forward-looking metric in the dataset, were down 2.8% from June and 5.7% from July 2024. Starts rose by 5.2% month over month and 12.9% year over year–the main bright spot of July’s data release. Completions grew by 6.0% from June but trail July of last year by 13.5%. This month’s data shows a continuation of the challenges facing builders, but also a glimmer of hope that more homes may be coming onto the market soon.
Where it happened
The permitting slowdown affected both single-family and multifamily projects. 1-unit home permits rose slightly (+0.5%) month over month, but were down 7.9% year over year. 1-unit or more home permits dropped by 9.9% from June, and were down 1.8% from July of 2024. 2-to-4-unit permits, however, had a nice rebound, increasing by 8.0% from last month and 1.9% from last year, as builders continue to prioritize the townhome segment as an answer to the affordability challenges facing buyers. Permits fell the most in the West, by 10.1% month over month and 15.2% year over year, and they actually grew in the Midwest, by 0.5% month over month and 12.9% year over year. We have shown that the price premium on new construction is far higher in the Midwest, so builders are responding to price signals in the region.
Housing starts picked up a bit in July for single family home projects (+2.8% month over month, +7.8% year over year), but significantly for multifamily projects (11.6% month over month, +27.4% year over year). Nationwide asking rents have been falling for two full years now, but multifamily construction has been weak recently and with vacancy rates beginning to fall, builders are anticipating better returns on their large apartment complex projects. Starts were strongest in the South, picking up by 19.2% month over month and 29.5% year over year to the highest seasonally adjusted annual rate since December 2024.
Completions were actually weaker among multifamily projects (-2.8% month over month, -28.8% year over year) than single-family ones (+6.0% month over month, -13.5% year over year) in July. The disparity between starts and completions in the multifamily space is interesting, and it may have to do with the types of materials builders have been stockpiling in advance of tariffs kicking in. Finishes like appliances are often imported and subject to tariffs, while lumber and concrete are more likely to be sourced domestically or at least have been kept in inventory prior to tariffs taking hold. This could have the effect of delaying completions while starts carry on.
What does this mean for homebuyers, sellers, homeowners, and the housing market
All things considered, this month’s new construction data does not provide many clear signals as to where homebuilding is heading. We know that new home sales have been quite slow this summer and that tariffs are adding complication and expense to building activity, but builders do not appear to be backing down much more than they already have.