Home Building Fell Sharply in July as Costs Increased

Abstract

House construction in the U.S. continued to slow in July, as high inflation and higher mortgage rates make it more expensive to build and buy property. Housing starts in July fell 9.6% from the month before to a seasonally adjusted annual rate of 1.45 million, the Commerce Department said Tuesday, down from a revised 1.60 million the prior month. The declines come amid moves by the Federal Reserve to raise interest rates to combat inflation and cool the economy. Gus Faucher, chief economist at PNC Financial Services Group, said the decline in housing construction makes sense because building and buying houses is tied to expectations for the economy and interest rates. Mortgage rates have declined recently but remain near high levels. The average rate on a 30-year fixed-rate mortgage was 5.22% last week, according to a survey by mortgage giant Freddie Mac. A year before the rate was under 3%. Higher mortgage costs make buying a home more expensive, as buyers pay more every month.