Housing starts missed estimates in July, which isn’t shocking given what is happening with rates lately, but the one takeaway from this report is that we don’t have a housing shortage in America, so stop expecting housing construction to bring meaningful supply to the market.
I’ve always had a different approach to this topic than others, but hopefully today we can finally let this narrative go because until demand starts growing again, nothing is happening here, nor should it. We should be grateful the builders had extra profit margins to pay down rates over the last few years, or this data would be worse than it is today.
From Census: Housing Starts: Privately-owned housing starts in July were at a seasonally adjusted annual rate of 1,239,000. This is 12.4 percent (±9.5 percent) below the revised June estimate of 1,415,000 and is 13.5 percent (±11.0 percent) below the July 2025 rate of 1,432,000. Single-family housing starts in July were at a rate of 808,000; this is 9.9 percent (±10.4 percent)* below the revised June figure of 897,000. The July rate for units in buildings with five units or more was 421,000.
As the chart below shows, little has changed here for years and housing starts are back to levels seen early in the COVID recession. If builders hadn’t been able to pay down rates during this period, this data line would look a lot worse.
This is one reason that the number of residential construction workers, where we would typically have seen a bigger decline in employment, has held up ok. Remodeling work has also been steady, since people are living in their homes longer and longer.
New home sales have been in a narrow sales range for 10 years now, if I take away the burst of home sales in COVID. As long as new home sales can still hold this range, housing starts won’t collapse anytime soon, but they won’t be growing in any meaningful way.
Building permits
Building Permits: Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,443,000. This is 5.0 percent above the revised June rate of 1,374,000 and is 3.1 percent above the July 2025 rate of 1,400,000. Single-family authorizations in July were at a rate of 894,000; this is 2.5 percent above the revised June figure of 872,000. Authorizations of units in buildings with five units or more were at a rate of 490,000 in July.
Housing permits picked up a bit more than estimates in July, but as you can see in the chart below, not much is happening here either. So when people say, “We have a housing shortage; we need builders to build a ton of new homes,” the builders don’t believe that right now.
Remember, in the builders’ history, when total completed units of sale go above 120,000, they tend to slow production. The last new home sales print was 118,000, which was an improvement from the recent highs, so things are slightly improving for the builders, but it’s from an elevated level.
Conclusion
It’s been more of the same for new home sales and housing starts for years; not much is going on, construction has been slowly declining and now rates have gone up a bit. The homebuilder confidence data is basically saying what I believe: if there was a real housing shortage, the builders confidence data would be booming, and it isn’t.
We are still building homes in America, but because new home sales are stuck, rent growth is limited and the cost of capital is not making sense for some builders, construction will be constrained until demand picks up. And we should all get used to this. I brought this up all the way back in June of 2021 when I said that as soon as rates rise, housing construction will slow — and the last few years are proof.