US Housing Market Shows Resilience, but Broader Economy Faces Inflation Pressures The US housing market showed a surprising uptick in new construction last month, but affordability challenges and supply constraints continue to cast a long shadow over the sector. At the same time, fresh data on US business activity points to stronger momentum in both manufacturing and services. Together, these developments highlight the difficult backdrop facing the Federal Reserve: even as Chairman Jerome Powell signalled at Jackson Hole that a September rate cut is likely, resilient demand and renewed inflationary pressures may limit how far the Fed can ease policy.
Figure 8. New Residential Construction Source: US Census Bureau)
According to the Monthly New Residential Construction data for July, housing starts rose 5.2 percent to an annualised pace of 1.43 million units. The increase was fueled by multifamily construction, which surged nearly 10 percent to a 489,000-unit rate, the strongest level since mid-2023. Single-family starts, which make up the bulk of the market, advanced 2.8 percent to 939,000 units but remain 4.2 percent lower on a year-to-date basis. Permits, a key indicator of future building activity, were less encouraging. Overall permits fell 2.8 percent to a 1.35 million-unit rate, the lowest in five years. While single-family permits edged up 0.5 percent to 870,000 units, multifamily permits dropped nearly 10 percent, signalling potential weakness ahead.