Reynolds notes that fundamentals for more single-family homebuilding are in place, “while the multifamily sector may take longer for starts to catch up to permits. The number of new single-family homes offered for sale before construction started has been growing faster than the total for the past six months.

“Homebuilders are relatively optimistic about the traffic and sales prospects for new homes,” she adds. “Despite the weak start in July, we anticipate that housing starts will expand in the third quarter.” The Census Bureau/HUD data comes one day after the National Association of Home Builders showed a rebound in builders' confidence in the market for single-family homes.

WASHINGTON, DC—A sharp drop in construction starts for multifamily properties brought groundbreakings overall down by 4.8% during July, according to data released Wednesday by the Census Bureau and the Department of Housing and Urban Development. The 15.3% seasonally adjusted monthly drop in starts for buildings with five or more units continued a deteriorating trend in multifamily construction and compared with a 0.5% decline in single-family starts.

Other metrics in the July residential construction data also pointed to weakness in multifamily. Year-over-year, groundbreakings on apartment properties are off 35.2%.

Permitting for multifamily is also down, although to a lesser extent. Authorizations were off 11.2% from the previous month, while the single-family category was flat compared to June. Again, the decline in multifamily permitting was behind an overall drop of 4.1%.

Kristin Reynolds, associate director, US economics at IHS Markit, points out the tightening standards and weakening demand for construction and land development loans on multifamily properties, as reported in the FDIC's Senior Loan Officer Survey for July. “While the Census Bureau suggests it takes six months to determine a trend in starts, building permits require three months,” Reynolds says. “Both single-family and multifamily permits failed to expand in July. The three-month trend in single-family authorizations rose after four months of declines, but the trend in multifamily permits declined in six of the past eight months.”

Reynolds notes that fundamentals for more single-family homebuilding are in place, “while the multifamily sector may take longer for starts to catch up to permits. The number of new single-family homes offered for sale before construction started has been growing faster than the total for the past six months.

“Homebuilders are relatively optimistic about the traffic and sales prospects for new homes,” she adds. “Despite the weak start in July, we anticipate that housing starts will expand in the third quarter.” The Census Bureau/HUD data comes one day after the National Association of Home Builders showed a rebound in builders' confidence in the market for single-family homes.