U.S. homebuilding falls to lowest level in 18 months

STORY: The U.S. housing market is showing signs of strain.

Homebuilding fell to the lowest level in 18 months in July, weighed down by higher mortgage rates and the rising cost of materials, suggesting the housing market could contract further in the third quarter.

Housing starts plunged 9.6% last month to a rate not seen since February 2021.

The housing market's declining fortunes brought fears of a broader economic recession back into focus.

Hitting the housing market – Higher mortgage rates.

A 30-year fixed-rate mortgage is hovering around an average of 5.22%, up 2 percentage points from earlier this year, according to data from mortgage finance agency Freddie Mac.

Rising borrowing costs is pushing homeownership out of reach for many Americans.

Though higher borrowing costs are having a chilling effect, economists say an outright collapse is unlikely because of a critical shortage of single-family homes for sale, which is keeping prices elevated.