U.S. July Construction Spending Falls to Nearly Three-Year Low as Single-Family Housing Plunges 6.5% YoY
nashnova research
U.S. construction spending fell 0.5% in July to $2.158 trillion, the lowest since October 2023; single-family housing plunged 6.5% year-over-year as elevated mortgage rates and inventory gluts squeeze building activity — any near-term recovery hinges on whether rates ease.
How far did overall construction spending fall?
July construction spending dropped 0.5% month-over-month to $2.158 trillion, missing the consensus forecast of flat and hitting the lowest level in nearly three years.
Year-over-year, spending contracted 3.8%, extending the broader downtrend in building activity.
June data was revised up from -0.1% to flat — This means → July's decline is genuine deterioration, not a base-effect artifact.
How are high mortgage rates weighing on housing?
The average 30-year fixed mortgage rate sits near 6.66%, close to a one-year high.
Since the U.S.–Israel war against Iran broke out in late February, mortgage rates have climbed roughly 70 basis points.
In plain terms = borrowing costs rise → fewer buyers → builders pull back on new projects, dragging residential investment down 1.3% month-over-month.
Why is single-family housing the hardest hit?
Single-family project spending fell 3.2% month-over-month and plunged 6.5% year-over-year — the steepest drop across all segments.
Beyond rate pressure, a backlog of unsold single-family homes is simultaneously squeezing new-start demand — a double bind.
Multi-family housing (apartments) edged up 0.2%, but its share is too small to offset the single-family drag.
Where did the CHIPS Act factory-building boom go?
Factory project spending fell 0.8% month-over-month and dropped 21.7% year-over-year.
This reflects the fading of the construction wave sparked by the 2022 CHIPS and Science Act, while AI infrastructure spending is not yet large enough to fill the gap.
Non-residential structures investment (power plants, factories, etc.) has now contracted for ten consecutive quarters; power-plant spending rose 0.5%, but that alone cannot turn the tide.
Can government spending provide a floor?
Public construction spending fell 0.2%, with federal project spending down 3.5% month-over-month.
State and local government spending was flat — no incremental support.
This means → with residential and non-residential both weakening, the public sector is offering no offset either; whether construction spending stabilizes near-term still depends on the path of mortgage rates.
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