Starts Plunge As Buyers And Builders Remain On the Sidelines

• Building permits issued in August decreased to 1,312,000 (SAAR). That’s 3.7% below the revised July rate and 11.1% lower than a year ago.
• Housing starts decreased to 1,307,000 (SAAR) in August, down 8.5% from the revised July estimate and is 6% lower than a year ago, according to the U.S. Census Bureau.
• Single-family housing starts decreased to 890,000 (SAAR) in August, decreasing 7% from the July estimate and 11.7% lower than in August 2024.

What happened: Housing starts decreased in August. Slowing price growth, weaker than expected sales and rising input costs are dragging down builder confidence. Permitting activity remains weak and points to sluggish new home construction. With so many homes already under construction in a rapidly slowing economy, builders are remaining on the sidelines. In August, single-family permitting activity was down in every region except the Midwest where housing remains relatively more affordable.

The silver lining: Mortgage rates have eased somewhat since May, which could help push some buyers over the edge of affordability and support home sales in the coming months. Future sales expectations hit a 6-month high according to the National Association of Home Builders.

Why this matters: Many builders pumped the brakes on new projects this year. The total number of single-family permits in the first half of this year fell below year ago levels. 

Despite a small improvement in housing affordability this year, home sales continued to bounce along the bottom. The slower than expected home shopping season has caused the number of unsold new homes to accumulate, weighing on builder confidence.

In July, the median price per square foot of new construction homes was down 1.2% from a year ago according to Zillow data.