Economic Watch: U.S. housing starts plummet in July amid elevated rates

WASHINGTON, Aug. 21 (Xinhua) -- U.S. housing starts fell sharply in July, dropping 12.4 percent from the previous month, data released Tuesday by the U.S. Census Bureau and the Department of Housing and Urban Development showed. Privately owned housing starts fell to a seasonally adjusted annual rate of 1.239 million units, down 13.5 percent from a year earlier. The reading was also weaker than economists had expected. "The drop in starts was striking," Dean Baker, a macroeconomist and co-founder of the Center for Economic and Policy Research, told Xinhua. "It's clearly a response to higher interest rates," Baker said. The average contract rate on a 30-year fixed-rate mortgage stood at 6.77 percent in the latest Mortgage Bankers Association survey, close to its highest level in more than a year. Single-family starts fell 9.9 percent to a seasonally adjusted annual rate of 808,000 units, the lowest level since November 2022. Multifamily starts dropped 16.8 percent after surging in June. Regionally, housing starts fell 27.6 percent in the Midwest, 13.8 percent in the West and 12.6 percent in the South. The Northeast was the only region to post an increase, with starts rising 17.1 percent. Baker said whether housing starts remain low or begin to recover depends on several factors, including interest rates and the Iran war. "We may also get a recession if the war continues and oil prices go even higher," he said. The weak housing data could also carry political implications ahead of November's midterm elections. Darrell West, a senior fellow at the Brookings Institution, said the drop in housing starts indicates businesses are not confident in the overall economy. "They don't want to invest money in a situation where they are not sure about the rate of return," West told Xinhua. "This is just one more sign of an economy that is not going well and that likely will harm Republican prospects in November," he said.