US Housing Market Faces Eight-Month Low Amid Rising Mortgage Rates

U.S. single-family homebuilding fell to an eight-month low in June amid rising mortgage rates, highlighting a housing market that may have weighed on economic growth in Q2. The Commerce Department's report also showed permits for future construction of single-family houses dropping to a one-year low, indicating that any rebound, should the Federal Reserve cut interest rates in September, could be limited.

Despite this downturn, new construction is still driven by a shortage of previously owned houses for sale, keeping home prices high and combining with higher borrowing costs to push homeownership out of reach for many. The housing market has been severely impacted by the U.S. central bank's aggressive monetary policy aimed at curbing inflation.

Economists predict that residential investment likely subtracted from GDP growth in the last quarter. High mortgage rates have dampened homebuying momentum, but there remains cautious optimism as the average rate on a 30-year fixed mortgage shows signs of decreasing. However, concerns over economic activity and unemployment may keep builders cautious.

(With inputs from agencies.)