U.S. Housing Starts and Permits (July 2025)

Homebuilding activity expanded in July, but underlying data remains soft

• Housing starts rose 5.2% month-on-month (m/m) in July to 1.43 million (annualized) units, well above consensus expectations for a 1.8% m/m decline. Revisions to the data for the two prior months added 56k units to the previous reported tallies.
• July's rebound in housing starts was driven by the multi-family segment - up 9.9% m/m (or 44k units). The larger single-family segment recorded a smaller uptick of 2.9% m/m (or 26k units).
• Residential permits fell 2.8% m/m to 1.35 million annualized units. Permitting activity declined in the multi-family segment (-9.8% m/m) but rose slightly in the single-family segment (+0.5% m/m).
• Among the four Census regions, gains were recorded in the South (+19.2% m/m) and the Midwest (+33.3% m/m). Declines were recorded in the Northeast (-26.0% m/m) and West (-27.5% m/m).

Key Implications

• Homebuilding activity picked up to start the second half of the year as the multi-family segment recorded a strong month in the Midwest and South regions. However, the smaller multi-family segment is volatile and given the 10% decline in permits recorded during the month, we are likely to see a pullback of this gain over the coming months. Despite the modest rebound in the larger single-family segment, starts were still subdued relative to the first half of the year as affordability constraints have weighed on demand and led to a 3-year high in the days' supply of new homes inventory.
• Homebuilder sentiment remained weak through August according to the National Association of Homebuilders' survey, with indicators for current sales and buyer traffic remaining soft. While sentiment plateaued in August, it was still sitting at a level that had not been seen since late 2022, after the Fed had raised rates by over 4 percentage-points during the prior 12 months. As the Fed returns to interest rate reductions over the coming months, some support will be provided to the homebuilding market, but the expected implementation of lumber tariffs, on top of 50% tariffs on imported steel, aluminum, and copper, will likely continue to restrain homebuilding through the second half of the year.  

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