U.S. single-family homebuilding plummeted to an eight-month low in June due to soaring mortgage rates, suggesting the housing market dragged on economic growth in Q2. The Commerce Department reported Wednesday that permits for future single-family home construction dropped to a one-year low, indicating a muted rebound even if the Federal Reserve cuts rates in September as expected.
The housing sector, hit hardest by the Fed’s aggressive monetary tightening, continues to grapple with a shortage of previously owned homes, keeping prices high and buying unaffordable.
Single-family housing starts fell 2.2% to an annual rate of 980,000 units, the lowest since last October, despite a revised higher May figure of 1.002 million units. The drop was noted in the Northeast and West, while the South and Midwest saw increases.
Despite a year-on-year increase of 5.4% in June, rising mortgage rates have dampened momentum. With inflation subsiding, mortgage rates have slightly decreased from a six-month high of 7.22% in May to 6.89% last week.
Permits for future single-family home construction slipped 2.3% to a rate of 934,000 units, the lowest since May 2023. While overall housing starts rose 3.0% to a rate of 1.353 million units, single-family homebuilding remains a critical concern for market stability.
