WASHINGTON (dpa-AFX) - After reporting significant increases in new residential construction in the U.S. over the two previous months, the Commerce Department released a report on Wednesday showing housing starts pulled back by much more than expected in the month of August.
The Commerce Department said housing starts plummeted by 8.5 percent to an annual rate of 1.307 million in August after surging by 3.4 percent to a revised rate of 1.429 million in July.
Economists had expected housing starts to tumble by 4.1 percent to an annual rate of 1.370 million from the 1.428 million originally reported for the previous month.
The much bigger than expected pullback by housing starts reflected steep drops by both single-family and multi-family housing starts.
The report said plunged by 7.0 percent to an annual rate of 890,000, while multi-family starts saw an 11.7 nosedive to an annual rate of 417,000.
The Commerce Department also said building permits dove by 3.7 percent to an annual rate of 1.312 million in August after slumping by 2.2 percent to a revised rate of 1.362 million in July.
Building permits, an indicator of future housing demand, were expected to jump by 1.2 percent to an annual rate of 1.370 million from the 1.354 million originally reported for the previous month.
The unexpected decrease came as single-family permits tumbled by 2.2 percent to an annual rate of 856,000 and multi-family permits plunged by 6.4 percent to an annual rate of 456,000.
'Homebuilders slowed construction in August, returning to the sluggish pace seen earlier in the year after a brief pickup in July,' said Nationwide Economist Daniel Vielhaber.
He added, 'With a weakening labor market and still high mortgage rates, we expect builder sentiment and, therefore, home construction to remain subdued at least into early 2026.'
On Tuesday, the National Association of Home Builders released a separate report showing homebuilder confidence in the U.S. held steady in the month of September.
The report said the NAHB/Wells Fargo Housing Market Index came in at 32 in September, unchanged from August. Economists had expected the index to inch up to 33.
While builder sentiment has lingered at relatively low levels since May, the NAHB said builders expressed optimism that a more favorable interest rate climate could bring hesitant buyers off the sidelines in the final quarter of 2025.
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