Housing starts sank 4.8% in July to a seasonally adjusted annual rate of 1.155 million, down from June's upward-revised 1.213 million, the Commerce Department reported Wednesday. July's figure was up 5.6% year-over-year.
Building permit authorizations, an indicator of future construction activity, changed course in July, falling 4.1% from June's upward-revised rate of 1.275 million to 1.223 million for the month. Permits are 4.1% above the year-ago mark.
Single-family starts edged down 0.5% in July to 856,000 from June's upward-revised rate of 860,000, but were still 10.9% ahead of a year ago. Multifamily starts dropped 17.1% from June's downward-revised rate of 346,000 to 287,000 starts in July. Multifamily starts were also down 35.2% year-over-year.
A sharp downturn in the multifamily segment brought down the month's overall starts, which missed analyst expectations of a 1.23 million pace, MarketWatch reported. While both starts and permits decreased from June to July, this month's report shows continued volatility in the market.
Meanwhile, supply-wide challenges have weighed on homebuilders' outlook for the new construction market. An index from the National Association of Home Builders and Wells Fargo tracking that figure reached its highest level in more than a decade in March before trending downward through July. In its latest reading, released yesterday, the index turned up slightly in August. The shift was credited to economic growth and competitive mortgage rates.
The continued cooling in multifamily follows forecasts that the post-recession boom in that segment would taper off as the housing market improves and a growing group of potential buyers seeks to own, or at least rent, their homes. While single-family permit authorizations were flat from June to July, they were up year-over-year, indicating more building activity ahead. Meanwhile, multifamily permit authorizations continue their downward trend.