Washington: The U.S. housing sector showed fresh signs of weakness in August, as government data revealed both single-family homebuilding and future construction permits fell, highlighting the pressure builders face from excess inventory and a cooling labor market.
According to the Commerce Department, single-family housing starts dropped 7% last month to a seasonally adjusted annual rate of 890,000 units, marking one of the sharpest declines of the year. At the same time, building permits for single-family homes slipped 2.2% to 856,000 units, signaling that builders remain hesitant to launch new projects.
The downturn comes despite a sustained decline in mortgage rates, which many analysts had expected to fuel fresh demand. The benchmark 30-year mortgage rate eased to 6.35% in August, the lowest level in nearly a year. Yet builders remain constrained by a growing glut of unsold properties and an economy showing signs of strain.
Industry experts point to oversupply as a central factor. With too many new homes still on the market, builders have little incentive to break ground on fresh projects. Many developers have already begun cutting prices or offering incentives to attract buyers, underscoring how inventories are weighing heavily on the market.
A softening labor market has added to the uncertainty. Slower job growth and hiring caution are eroding confidence in household purchasing power. For builders, the prospect of weaker employment prospects raises doubts about near-term demand, curbing enthusiasm for expansion.
Sentiment surveys echo the cautious mood. The National Association of Home Builders reported that while expectations for sales over the next six months have improved slightly, overall builder confidence remains fragile. Concerns about affordability, employment stability, and sluggish demand continue to cloud the outlook.
The Federal Reserve, which is widely expected to deliver a quarter-point rate cut this week, will be closely monitoring the housing sector. Policymakers see homebuilding as a bellwether for broader economic momentum. A prolonged slump in new construction could ripple outward, affecting construction employment, related industries, and local economies dependent on housing.
For buyers, the current environment may present opportunities. With builders under pressure to reduce inventories, some markets are seeing discounted prices and promotional offers. However, experts caution that affordability challenges remain, and lower mortgage rates alone may not be enough to spark a rebound until job and wage growth show firmer signs of recovery.
The August setback underscores the delicate balance facing the U.S. housing market: while financing costs are easing, oversupply and economic uncertainty are proving stronger forces, delaying hopes of a quick turnaround.