New U.S. residential construction dropped sharply in July, signaling a significant cooling in the housing market. Housing starts fell 12.4% to a seasonally adjusted annual rate of 1.239 million units, according to a Commerce Department report released Tuesday. This figure was far below the 1.34 million expected by economists polled by The Wall Street Journal and represented a 13.5% decrease from July 2025.
The decline was led by a 9.9% drop in single-family homebuilding, the largest component of the housing market. The report pointed to high mortgage rates and rising construction costs as persistent challenges for builders. The sharp miss on a key economic indicator suggests that affordability issues are significantly impacting new supply and could weigh on real estate sector performance.
In a contrasting data point, residential building permits, an indicator of future construction, rose by 5.0% to a rate of 1.443 million units, slightly above economists' expectations. This suggests a potential for stabilization, though current construction activity has clearly slowed.