Housing Starts and Pending Sales Retreat in July — Evening Brief – 08.18.26

Cool housing data highlighted persistent pressure on the real estate market in July as high mortgage rates constrained builder activity and home purchases, even as broader industrial output expanded modestly.

U.S. housing starts slid 12.4% month-over-month to a seasonally adjusted annual rate of 1.239 million units in July, according to U.S. Census Bureau data released Tuesday. The drop missed consensus expectations of 1.345 million units and marked a 13.5% decline compared to July 2025 levels. Single-family home construction fell 9.9% to an annual pace of 808,000 units, while overall housing completions dropped 9.1% month-over-month to 1.212 million units.

Compounding the real estate slowdown, the National Association of Realtors reported that its Pending Home Sales Index fell 2.3% in July to 71.2—its lowest level since January 2026. Pending sales dropped across all four major U.S. regions and were down 2.2% year-over-year.

“The highest mortgage rates of the year hit right in the middle of summer, and that’s pulling back contract signings,” said NAR Chief Economist Lawrence Yun. “Right now, pending contracts are 30% below their pre-pandemic 2019 level, while payroll employment is 5% above.”

Despite the pullbacks in construction and sales, future supply indicators provided a silver lining: building permits rose 5.0% to an annual rate of 1.443 million, beating the 1.370 million consensus.

Separately, Federal Reserve data showed U.S. industrial production rose 0.2% in July, supported by a 0.2% gain in manufacturing output alongside increases in mining and utilities. Capacity utilization edged up slightly to 76.3%.