Housing starts rebounded in June, rising 19% after dropping to a six-year low in May. The May decline appears to have been an outlier, with June’s rebound coming in above expectations.
Housing starts measure new homes that have broken ground and begun construction, and the annual pace reached 1.43 million units.
Building permits, which provide insight into future construction activity, declined 3% from May to an annual pace of 1.37 million units.
Despite the rebound in starts, builders remain cautious. The National Association of Home Builders’ Housing Market Index fell two points in July to 34. A reading below 50 means more builders view market conditions as poor rather than good. Affordability challenges, elevated mortgage rates, and higher construction costs continue to weigh on builder confidence.
What’s the bottom line? More housing supply is needed to help meet buyer demand, but building new homes takes time. Builders must navigate permitting, construction, and completion before new inventory reaches the market. If mortgage rates move lower and buyer demand strengthens, limited inventory could continue to provide support for home prices in the months ahead.