US new home construction activity took a significant hit in July, with groundbreaking on single-family homes sinking to levels not seen since 2022.

Data released by the US government on Tuesday revealed that overall housing starts plummeted by 12.4% month-over-month, translating to a seasonally adjusted annual rate of 1.24 million units. This figure fell well short of the 1.35 million units that economists had been forecasting.

The decline was broad-based, as starts for single-family homes dropped by 9.9% to an annualized pace of 808,000 units, marking the lowest reading since November 2022. Meanwhile, groundbreaking for multi-family projects, which include apartments and condominiums, tumbled by nearly 17%, pulling back sharply after a substantial surge in the previous month.

The softening in construction activity underscores the persistent weakness plaguing the US housing market. Elevated mortgage rates, which have climbed since the onset of the Iran conflict, combined with still-high property prices, continue to weigh heavily on buyer demand.

While residential investment did make a positive contribution to overall economic growth in the second quarter—a first since 2024—the boost was minimal and did little to offset the broader malaise. The outlook for new construction remains fraught with challenges.

On a brighter note, overall building permits increased by 5%, reaching their highest level since February, which could signal a potential uptick in construction activity in the months ahead. Government data also showed that permits for single-family homes rose to a four-month high, offering a glimmer of hope for the sector.

However, sentiment among industry professionals remains cautious. A recent survey indicated that a substantial 70% of investment professionals anticipate a decline in single-family housing starts over the course of this year.