US housing activity took another hit in July, with construction of single-family homes falling sharply and agreements to buy existing properties declining to their weakest levels in months.At the same time, US factories continued to benefit from strong investment in artificial intelligence, pushing manufacturing output to its highest level in more than four years.
Single-family homebuilding hits lowest since November 2022
The Census Bureau said single-family housing starts fell 9.9% in July to a seasonally adjusted annual rate of 808,000 units, the lowest pace since November 2022. Compared with July last year, single-family homebuilding was down 15.7%.The decline came even as permits for future single-family construction improved. Such permits rose 2.5% to an annual rate of 894,000 units in July.They were also 1.1% higher than a year earlier, recording only the second annual increase in the past two years. Despite the rise, permit issuance remained close to its weakest level in three years.“Until mortgage rates decline and allow builders to unload currently completed homes or those under construction, we expect home builders to remain hesitant to make significant investments in new projects,” Nationwide Senior Economist Ben Ayers said, according to Reuters.When apartments and other multifamily properties were included, total housing starts fell 12.4% to an annual rate of 1.239 million. Economists polled by Reuters had expected a rate of 1.35 million.Overall residential construction permits, however, increased 5.0% in July to an annual rate of 1.443 million, above economists’ estimate of 1.37 million.
Existing-home contracts fall to lowest level since January
Demand for existing homes also weakened. The National Association of Realtors said contracts signed for existing-home purchases declined 2.3% from June, taking them to their lowest level since January.High borrowing costs and a shortage of homes for sale have continued to weigh on affordability and sales in the residential property market.“The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” NAR chief economist Lawrence Yun said in a statement.“Home prices are at record highs so houses for sale are sitting on the market longer, and fewer buyers are bidding above the asking price than a year ago, though there are large local market variations.”Mortgage rates offered a small reprieve during the latest week.The contract rate for a 30-year fixed-rate mortgage, the most popular US home loan, edged down in the week ended August 7, its first decline since mid-June. At 6.77%, however, it remained near its highest level in more than a year.Builder sentiment had shown an unexpected improvement on Monday, according to the National Association of Home Builders. But confidence among construction firms remained significantly subdued, with high mortgage rates, elevated building costs and economic uncertainty continuing to weigh on the sector. Building costs were also aggravated by the US-led war with Iran.
AI investment keeps factory output on the rise
While housing struggled, manufacturing continued to gain from investment surrounding artificial intelligence. Demand for high-tech machinery and the materials required to construct and operate large data centres helped lift factory activity.The Federal Reserve’s manufacturing output index rose 0.2% in July after increasing 0.3% in June, with the previous month’s figure revised upwards. The index reached its highest level since April 2022.“The usual suspects, including AI-linked industries, drove industrial production, and particularly durable goods manufacturing, higher,” Bernard Yaros, lead US economist at Oxford Economics, said in a note.Production of business equipment rose 0.8%. Information-processing equipment output increased 1.5%, while industrial supplies climbed 1.4%, more than offsetting a fall in transit equipment production.Semiconductor production jumped 2.4%, while output of computers and peripheral technology equipment rose 1.8%.Yaros said the gains could increasingly extend beyond high-tech manufacturing. “AI is increasingly spilling over into other investment goods beyond information processing equipment,” he said.Defence production added 1.8% as spending remained high amid the US-led war with Iran.
Vehicle production slips
Motor vehicle assemblies fell to a seasonally adjusted annualised rate of 10.42 million in July from 10.68 million in June.Production of heavy and medium trucks, which indicates demand from trucking and delivery companies, also dropped to its lowest level since March.
