In the latest sign that the U.S. economy and its cold real estate market continue to slog through uncertainty, new home starts slid 8.5 percent in August, according to new data released Wednesday by the U.S. Census Bureau.
The number of new permits fell 3.6 percent from July to August, and 11.5 percent compared to a year ago. The dip brought the number of new single-family home permits to its lowest level since March 2023.
Economists pointed to a glut of unsold new homes, uncertainty created by the Trump administration’s tariff policies and general malaise in the U.S. economy.
“All things considered, this month’s new construction data points to a market that is still under strain,” said Hannah Jones, senior economic research analyst at Realtor.com. “August’s release shows that builders are pulling back on future projects even as they push to complete existing ones. Supply will likely tighten further down the road, unless demand conditions improve and permit activity stabilizes.”
New permits are considered the most forward-looking metric in the data released by the Census Bureau. New permits have fallen in nine out of the past 12 months.
New home completions jumped 8.4 percent from July to August, but that figure was also down 8.4 percent from a year earlier. Economists said that the slowdown was consistent with overall builder sentiment, which has been negative for the past 17 straight months.
“Single-family construction is trending lower as builders work to balance elevated inventories with softer demand, pressured by affordability challenges and improved re-sale supply,” said Odeta Kushi, deputy chief economist at First American. “Meanwhile, single-family permits continue to signal pressure on building activity.”
The new report is the latest sign that the new construction market is flashing warning signs for the broader economy and a possible continued ice-cold real estate market. Indeed, Lisa Sturtevant, chief economist at Bright MLS, noted in a statement that residential building activity can be a recession warning sign.
“A pullback in residential building activity has historically preceded an economic recession,” Sturtevant said. “When home building slows, it has a ripple effect across the economy. Declining new construction also reflects less consumer demand and indicates that overall consumer spending could be waning.”
The construction quit rate, a measure of how many construction workers left their jobs in a given month, fell to the lowest rate in July since August 2009, just two months after the end of the Great Recession.
Economists said at the time that was an indication that construction workers who had jobs were reluctant to find new ones given uncertainty in the market.
“Housing affordability is hurting buyer traffic for builders, and as a result builders have slowed single-family home construction,” said Buddy Hughes, chairman of the National Association of Home Builders. “Nonetheless, our latest survey shows builders reported an increase for future market expectations as mortgage rates have posted a modest decline in recent weeks.”
