In August, new U.S. home construction dropped to the lowest level since 2020, underlining the ongoing challenges facing the housing market.
The Commerce Department said it rose 11.3% last month to an annual rate of 1.28 million units. This is well below Refinitiv economists' forecast for a pace of 1.44 million units.
Applications to build - measures future construction - saw an uptick in August, climbing 60.9 over the course of the month to an annualized rate of 1.54 million units. In comparison to the same period last year, construction permits fell about 2.7%, compared to the same period last year.
The data came one day after the National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the housing market, fell five points to 45, the lowest reading since April 2023. The drop happened in July following a six-point drop in August.
If a reading below 50 is considered negative, it is considered a negative reading.
As demand among builders for new construction had been steady in the past year, it has led to a surge in demand among investors to seek out new construction instead. But when mortgage rates surged above 7% in September, it towed away demand among those who wanted to buy a home.