Housing starts dropped to a seasonally adjusted annual rate of 1.31 million in August
New data from the US Census Bureau and US Department of Housing and Urban Development (HUD) released Wednesday showed a sharp drop in housing starts and building permits in August. This comes amid a weaker job market and too many unsold homes, fueling doubts about where the housing sector is headed for the rest of the year.
Housing starts fell to a seasonally adjusted annual rate of 1.31 million in August, down from 1.43 million (8.5%) in July and 1.39 million (6%) in August 2024. Building permits also dropped to 1.31 million, compared to 1.36 million (3.7%) in July and 1.48 million (11.1%) in August last year.
Single-family housing starts fell 7.0% month-over-month to a seasonally adjusted annual rate of 890,000 units. Permits for future single-family construction also dropped, sliding 2.2% to a rate of 856,000 units. The broader housing starts figure, which includes multi-family units, dropped 8.5% month-over-month to an annual rate of 1.307 million, missing consensus estimates and marking a 6.0% year-over-year decline.
Falling rates offer little relief
The 30-year fixed mortgage rate fell to 6.35% last week—its lowest level in 11 months and down from over 7% in January, according to Freddie Mac. But this drop hasn’t done much to boost the market, as economic uncertainty remains high.
The Federal Reserve is expected to cut rates by 25 basis points today to help the job market, after pausing earlier in the year because of inflation worries tied to tariffs. Still, most analysts said lower rates alone wouldn’t make up for slow job growth and rising unemployment.
Unsold homes and broken contracts
The slowdown is happening as unsold homes pile up. According to Zillow, homes now take 27 days on average to sell—about a week longer than last year. New listings fell 7.3% from July, hitting their lowest point since Zillow began tracking.
Similarly, Realtor.com reported that in July, 57% more homes were pulled off the market compared to a year earlier. For the first time in years, more homes left the market unsold than were added, especially in the South and West, where sellers have been less willing to negotiate.
At the same time, the job market is losing steam. The Bureau of Labor Statistics said only 22,000 jobs were added in August, much lower than the 76,500 expected. Unemployment also ticked up to 4.3% from 4.2%.
