Housing starts in the United States declined in August, as new residential construction activity showed signs of slowing. The Commerce Department reported on Thursday that housing starts fell 2.6% to an annual rate of 1.275 million units. Compared with August 2025, starts were down 1.2%.

Building permits, which signal the future direction of housing construction, also decreased by 2.7% to 1.394 million units in August. This figure came in slightly below economists’ expectations, who had predicted permits would hold steady at around 1.4 million.

The decline in both housing starts and permits points to a cooling housing market amid ongoing economic pressures. On Wednesday, the National Association of Home Builders (NAHB) released its monthly survey showing that builder sentiment had dropped to its lowest point in a year. This reduced confidence among homebuilders suggests further decreases in housing activity could be expected in the coming months.

Observers have attributed the downturn largely to elevated borrowing costs, which continue to weigh on developers and potential buyers. Capital Economics noted that these higher interest rates are restraining new construction, reinforcing the view that housing starts will likely continue to trend downward.

The data highlights the challenges facing the residential construction sector as it navigates a landscape marked by tightening financial conditions and cautious market participants.