Home builders are not breaking ground

August 18, 2026

Housing starts, another name for new home construction, plunged 12.4% in July to a seasonally adjusted annual rate of 1.24 million. The sharp decline gave back June’s gains, which were revised lower. Total starts fell 13.5% below year-ago levels. All regions except the Northeast posted weaker starts in July. 

Single-family starts fell 9.9% to 808,000, the lowest level since November 2022, and declined in all four regions. They are off 15.7% from a year ago. The three-month average, which strips out monthly noise, fell 3.9%; it’s been down for three consecutive months.

Single-family units under construction fell 1.2% for July and 7.2% from a year ago. Completions tumbled 5.8% but remain stronger than starts. Builders are finishing homes faster than they are breaking ground on new ones for the third month in a row. The pipeline that feeds future supply keeps shrinking. 

Multifamily starts plunged 15.6% to 421,000 for buildings with five units or more. The series is very noisy; on a three-month-moving average basis, starts slid 5.7% lower in July compared to June. The South and Midwest saw the biggest drops in starts. 

Multifamily under construction eked out a 0.8% gain to the highest level since February at 666,000 units. Multifamily completions dropped 14.8% to 329,000 units, the lowest level since April 2022. Near-record numbers of apartments were completed back in 2024 and have supported the drop in rental costs in high-supply markets. Rents have now reversed and are expected to tick up again.  

Separately, building permits, an indicator of future construction activity, rose 5.0% to 1.44 million in July. Single-family permits edged up 2.5% to 894,000. Multifamily permits gained 9.1% to reach 490,000. 

Builders are pulling permits and deciding not to break ground. With rates near a one-year high and costs climbing, a permit represents optionality, not a commitment.

According to the National Association of Home Builders, builder sentiment inched up one point to 35 in August but has held below 40 for 16 consecutive months, the longest stretch since 2012. About 35% of builders cut prices, with the average discount at 6%. Incentives ran at 63% for a 16th straight month at or above 60. Custom builders at the higher end report stronger conditions than speculative builders; publicly owned companies can fund rate buydowns and are outrunning private builders who cannot. Another trend: smaller markets are outperforming large metro areas. 

Mortgage rates climbed to their highest level in about a year through early August before edging lower. The 30-year fixed rate mortgage averaged 6.67% in the week ending August 13, down from 6.69% the prior week and above 6.58% a year ago. The war in Iran and its effect on energy prices, added to sticky service sector inflation and heavy bond issuance continue to hold a floor under long-term rates.

Costs are still rising. Residential building material prices excluding energy rose 0.4% in July and were 5.0% higher than a year ago, the fastest annual pace since December 2022. Energy prices fell in July but remain well above year-ago levels. Rising gas and diesel prices are feeding back into material costs. Some inputs have softened, ready-mix concrete among them, but the broad producer price index for construction keeps climbing.

The stalemate in the Strait of Hormuz is adding insult to injury by boosting costs more rapidly than just oil prices alone. Refined products, including diesel fuel, are surging again. Those shifts show up directly and indirectly in the construction process via onsite costs and construction materials. Tariffs have added to the cost pressures builders are facing.