U.S. new housing starts rebounded 4.6% in June, but the surge in multi-family homes cannot hide the weakness in the single-family market

According to the Zhitong Finance APP, new housing starts in the U.S. rebounded in June, driven by multi-family residential projects, but the single-family housing market, which holds a larger market share, continues to be weak, reflecting the dual challenges of inventory backlog and insufficient homebuyer affordability faced by developers. According to government data released on Friday, the seasonally adjusted annual total of new housing starts in June increased by 4.6% month-on-month to 1.32 million units, reversing nearly a 10% decline in May, with the median forecast from economists being 1.3 million units. Despite increased activity among apartment builders, the overall sluggishness of the new housing market indicates that developers are slowing their investment pace to digest the new housing inventory, which has swollen to its highest level in 17 years. Developers are also facing competitive pressure from a surge in existing home listings—current mortgage rates nearing 7% are prompting more homeowners to put their properties up for sale. To cope with market pressures, builders are adopting price-cutting promotional strategies, but this simultaneously undermines their willingness to develop. Government data shows that the annualized number of single-family housing starts in June fell to 883,000 units, marking one of the lowest levels since the beginning of 2023. Meanwhile, multi-family housing starts rebounded by 30% after a significant decline in the previous month. These data points conclude the second quarter, suggesting that residential investment may pose a slight drag on GDP. The Atlanta Fed's GDPNow model predicted before the report's release that the negative impact of this sector on economic growth would be the largest since the end of 2022. Bloomberg economist Stuart Paul stated, "We expect builders to continue focusing on developing smaller, lower-priced units, as homebuyer affordability has become a widespread social issue." Ben Ayers, a senior economist at the National Insurance Group, mentioned this week that by 2026, headwinds such as mortgage rates and uncertainties surrounding Trump’s tariff policies faced by builders may ease. However, he also pointed out, "It is indeed difficult to be optimistic in the second half of 2025." This assessment is supported by data indicating that permits for future single-family housing construction have declined for the fourth consecutive month, falling to a two-year low. Government data shows that the number of single-family homes under construction has continued a downward trend for three years. Regionally, single-family home construction across the U.S. is generally shrinking, with the most significant declines occurring in the two major construction areas of the West and South. It is important to note that new housing start data can be quite volatile. Government reports indicate that its 90% confidence interval ranges from a decline of 6% to an increase of 15.2%. The National Association of Realtors will release the June existing home sales report on Wednesday, providing the latest interpretation of the conditions in the existing home market