The numbers: A persistent lack of listing for the sale of existing homes has pushed more home buyers to consider newly built homes, prompting home builders to ramp up construction of new U.S. homes in July.

Construction rose 3.9% that month as home builders sought to fill Americans’ need for homes.

So-called housing starts rose to a 1.45 million annual pace from 1.4 million in June, the government said Wednesday. That’s how many houses would be built over an entire year if construction took place at the same rate in every month as it did in July.

Housing starts are down from a peak of 1.8 million in April 2022.

The July data was in line with expectations on Wall Street. Economists on Wall Street were expecting an increase in starts to 1.45 million. All numbers are seasonally adjusted.

The number of homes started in June was heavily revised downwards, to a drop of 11.7% to 1.44 million, from an initial reading of a drop of 8%. The drop in June was the biggest in a year.

Strong interest from aspiring homeowners is boosting builders’ business, as buyers face a lack of options in the resale market, but with mortgage rates remaining high, that may dampen home-buying demand further, which could hurt home buyers in the upcoming months.

Single-family construction led in July, while multi-family was flat. The increase in construction activity in July was led by the West, where builders reported a 28.5% increase in single-family home starts.

Building permits, a sign of future construction, rose 0.1% to a 1.44 million rate.

Key details: The construction pace of single-family homes rose by 6.7% in July, and apartment building was flat.

Home builders ramped up the most in the West, followed by the Midwest. Housing starts overall in the West rose by 14%, and 10% in the Midwest.

Housing starts fell in only one of the four regions—the South. Construction of homes fell by 1.3% in July in the region.

Permits for single-family homes inched up 0.6% in July, while permits for buildings with at least five units or more dropped by 0.2%.

Around 1.68 million homes were under construction as of July.

Big picture: Home builders are seen as the biggest winners of this frozen housing market, but even their shine may wear off in the face of the new normal of 7% mortgage rates.

Even though housing starts rose in July, builders are concerned about demand and are upping sales incentives to boost sales. The share of builders cutting prices to boost sales rose for the first time in five months to 25% in August, the National Association of Home Builders. The average price cut was 6%. Builders were also becoming less optimistic about future sales, as traffic of potential buyers fizzled out.

What are they saying? “There was no major drama in the US housing starts data for July, staying consistent with the slow pace for homebuilding seen since last summer,” Ali Jaffery, an economist with CIBC Economics, wrote in a note. “Momentum in housing starts over the past few months has picked up from its lows around the start of the year but the level remains fairly weak.”

“It does seem that housing activity is in the process of forming a bottom after plunging from early 2022 through the beginning of this year,” Stephen Stanley, chief U.S. economist at Santander U.S. Capital Markets, wrote in a note.

He also noted that multi-family starts—which includes the construction of townhomes and apartments—fell in July to the lowest reading in nearly two years. “The boom in apartment building that took place in 2021 and 2022 is beginning to lose steam,” Stanley said. “A large amount of apartment supply is coming on line, which may help to tamp down the uptrend in shelter costs. The slowdown in multifamily starts in recent months suggests that builders have determined that there is enough apartment supply in the pipeline.”

Market reaction: U.S. stocks were set to open lower early Wednesday. The yield on the 10-year Treasury note rose above 4.2%.

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