U.S. Housing Market Slows: July 2024 Permits, Starts Drop Amid Rising Rates, Uncertainty

U.S. Residential Construction Slows in July 2024

The latest data from the U.S. Census Bureau and the Department of Housing and Urban Development reveals a significant decline in new residential construction activity for July 2024, signaling potential challenges in the housing market.

Building Permits

Building permits, a key indicator of future construction activity, fell to a seasonally adjusted annual rate (SAAR) of 1.396 million in July. This marks a 4.0% decrease from June’s revised figure of 1.454 million and a 7.0% drop compared to July 2023. The decrease was most pronounced in multi-family units, with permits for buildings with five or more units dropping to a rate of 408,000. Single-family authorizations remained relatively stable at 938,000, down just 0.1% from June.

Housing Starts

Housing starts experienced a sharper decline, plunging to a SAAR of 1.238 million in July, down 6.8% from June’s revised estimate of 1.329 million and a significant 16.0% below the July 2023 rate of 1.473 million. Single-family housing starts were particularly hard-hit, falling 14.1% from June to a rate of 851,000. The rate for units in buildings with five or more units dropped to 363,000.

Housing Completions

Despite the slowdown in permits and starts, housing completions were strong in July, with a SAAR of 1.529 million. This is a 9.8% decrease from June’s revised rate of 1.696 million but a 13.8% increase compared to July 2023. Single-family completions edged up slightly by 0.5% to a rate of 1.054 million, while completions for units in buildings with five or more units reached 473,000.

Market Forecast

The decline in building permits and housing starts suggests a bearish outlook for the U.S. residential construction market in the near term. Rising interest rates, coupled with economic uncertainty, are likely contributing to the pullback in new construction activity. Traders should brace for potential weakness in housing-related stocks and industries linked to residential construction.