Blame the weather if you like, but the pace of single-family home construction in America just collapsed by the most since the original COVID shock.

Anyone unlucky enough (or junior enough) to be logged in Friday saw the US government report a 14.1% plunge in single-family housing starts for July, the largest MoM decline since April of 2020, when the economy was shuttered by a mysterious plague.

As the figure shows, the annualized pace is now consistent with that witnessed on the heels of the most aggressive stretch of the Fed’s rate-hiking campaign.

Both the South and the Northeast saw huge drops in single-family building — 23% and 27%, respectively. There are probably hurricane effects in there.

Rain and wind aside, it’s not a coincidence that single-family starts collapsed just as builder sentiment was on the cusp of falling to a new 2024 low. Recall that the NAHB print for August was a very poor 39, 11 points below the threshold separating net optimism from pessimism.

We can now fill in the chart below with a new single-family starts print.

Again: That’s not a coincidence. The relationship between the two series did break down late last year, but intuitively (and colloquially): When the people building the homes are p–sed off or otherwise irritable in the presence of crimped margins, the homes might not get built.

Note also that the pace of single-family starts appears to be underperforming versus builder sentiment all of a sudden, no small feat considering how poor builder moods are (that underperformance could also speak to the notion that weather played a big role).

Remember: These figures don’t capture the huge drop in mortgage rates seen during the second week of this month. Builder sentiment will probably inflect in September’s NAHB release and that should eventually catalyze a recovery in new construction, particularly if lower rates obviate the need to offer incentives.

That said, do note that builders are grappling with an inventory glut in stark contrast to the supply shortage on the resale property side. That’s another paradox of the troubled US housing market: New construction stepped in to fill the resale void left by the “golden handcuffs” effect, but between high rates and high prices, demand for newly-build homes waned, leaving builders stuck with the most inventory since 2008. From a kind of big-picture perspective, the US desperately needs more single-family housing. And yet, unsold newly-built homes are piling up.

Multifamily was strong in Friday’s release, laying the lackluster headline at the feet of the single-family slowdown. The overall starts print showed a 6.8% drop, worse than every estimate.