Homebuilders Keep On Starting in July

Blog

Stay up to date on timely topics and market events. Subscribe to our Blog now.

Single-family housing starts rose 2.8% in July on top of June sales estimates that were revised 3.4% higher from what was announced a month ago. Now, even with these gains and revisions, recent housing starts are not quite “busting it.” There still appears to be a downward trend for starts over the last five months. What is surprising to us is how leisurely that downtrend continues to be.

As suggested by Exhibit 1, homebuilders have been starting homes faster than they can sell them for most of the last five years. As a result, inventories of unsold new homes have been piling up. In June, inventory levels of unsold new homes were equivalent to 10 months’ worth of sales compared to “normal” inventory levels of about 4 months’ sales. It follows that homebuilders yesterday reported that they were generally cutting prices for new homes.

Sales and Starts of New, Single-Family Homes

Yet, again, starts of new homes appear to be holding at levels substantially above the pace at which homebuilders are selling homes, indicating that inventories will move still higher. Long-time readers of this blog will note that we have been citing these facts since 2022, when rapidly rising mortgage interest rates were compounding the “overbuilding” problem. Since then, starts activity has retreated from 2021 levels and, again, looks to be declining leisurely this year, but, admittedly, this is nothing like the wrenching declines that one might have thought would occur.

Will homebuilders continue to start new homes at relatively brisk rates while and as new-home inventories approach 11 or even 12 months’ sales. Tune in next month to find out.

Meanwhile, multi-family starts logged a 9.9% increase in July. Multi-family starts are exceedingly volatile month to month, so the magnitude of the reported July gain can be discounted. Still, multi-family starts have exhibited a clear uptrend over the past year, after precipitous declines in 2023 and early 2024.

The gestation period for multi-family home construction is years longer than that of single-family homes, and we have seen enough previous declines that the number of multi-family units under construction is likely to decline for a while yet. Currently, 736,000 multi-family units are reported to be under construction. That is down from 1,016,000 under construction in 2023, but up from about 660,000 in 2020 and earlier.

As with single-family units, the supply of multi-family homes looks to be more than ample, with a big backlog due to the elevated construction rates of 2023-2024. Yet builders continue to start new units at a brisk pace.

© Western Asset Management Company, LLC 2025. The information contained in these materials ("the materials") is intended for the exclusive use of the designated recipient ("the recipient"). This information is proprietary and confidential and may contain commercially sensitive information, and may not be copied, reproduced or republished, in whole or in part, without the prior written consent of Western Asset Management Company ("Western Asset").

Past performance does not predict future returns. These materials should not be deemed to be a prediction or projection of future performance. These materials are intended for investment professionals including professional clients, eligible counterparties, and qualified investors only.

These materials have been produced for illustrative and informational purposes only. These materials contain Western Asset's opinions and beliefs as of the date designated on the materials; these views are subject to change and may not reflect real-time market developments and investment views.

Third party data may be used throughout the materials, and this data is believed to be accurate to the best of Western Asset's knowledge at the time of publication, but cannot be guaranteed. These materials may also contain strategy or product awards or rankings from independent third parties or industry publications which are based on unbiased quantitative and/or qualitative information determined independently by each third party or publication. In some cases, Western Asset may subscribe to these third party's standard industry services or publications. These standard subscriptions and services are available to all asset managers and do not influence rankings or awards in any way.

Investment strategies or products discussed herein may involve a high degree of risk, including the loss of some or all capital. Investments in any products or strategies described in these materials may be volatile, and investors should have the financial ability and willingness to accept such risks.

Unless otherwise noted, investment performance contained in these materials is reflective of a strategy composite. All other strategy data and information included in these materials reflects a representative portfolio which is an account in the composite that Western Asset believes most closely reflects the current portfolio management style of the strategy. Performance is not a consideration in the selection of the representative portfolio. The characteristics of the representative portfolio shown may differ from other accounts in the composite. Information regarding the representative portfolio and the other accounts in the composite are available upon request. Statements in these materials should not be considered investment advice. References, either general or specific, to securities and/or issuers in the materials are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendation to purchase or sell such securities. Employees and/or clients of Western Asset may have a position in the securities or issuers mentioned.

These materials are not intended to provide, and should not be relied on for, accounting, legal, tax, investment or other advice. The recipient should consult its own counsel, accountant, investment, tax, and any other advisers for this advice, including economic risks and merits, related to making an investment with Western Asset. The recipient is responsible for observing the applicable laws and regulations of their country of residence.

Founded in 1971, Western Asset Management Company is a global fixed-income investment manager with offices in Pasadena, New York, London, Singapore, Tokyo, Melbourne, São Paulo, Hong Kong, and Zürich. Western Asset is a wholly owned subsidiary of Franklin Resources, Inc. but operates autonomously. Western Asset is comprised of six legal entities across the globe, each with distinct regional registrations: Western Asset Management Company, LLC, a registered Investment Adviser with the Securities and Exchange Commission; Western Asset Management Company Ltda. is regulated by Comissão de Valores Mobiliários; Western Asset Management Company Pty Ltd ABN 41 117 767 923 is the holder of the Australian Financial Services License 303160; Western Asset Management Company Pte. Ltd. Co. Reg. No. 200007692R is a holder of a Capital Markets Services License for fund management and regulated by the Monetary Authority of Singapore; Western Asset Management Company Ltd, a registered Financial Instruments Business Operator and regulated by the Financial Services Agency of Japan; and Western Asset Management Company Limited is authorised and regulated by the Financial Conduct Authority ("FCA") (FRN 145930). This communication is intended for distribution to Professional Clients only if deemed to be a financial promotion in the UK as defined by the FCA. This communication may also be intended for certain EEA countries where Western Asset has been granted permission to do so. For the current list of the approved EEA countries please contact Western Asset at +44 (0)20 7422 3000.