US residential construction declined unexpectedly in August to one of the weakest paces since the pandemic, reflecting a plunge in starts of multifamily projects. Housing starts decreased 2.6% to an annualized rate of 1.28 million, according to federal government data released Thursday. The median forecast in a Bloomberg survey of economists was a 1.32 million pace.

Single-family home construction rose 2.0% to 920,000 units, while multifamily starts fell 16.0% to 360,000 units. The drop was concentrated in buildings with five or more units. New residential construction permits, a leading indicator of future activity, decreased 4.5% to 1.31 million.

The data reflects ongoing challenges in the housing market as high mortgage rates and affordability constraints continue to weigh on demand. Analysts noted that the unexpected weakness in multifamily starts suggests shifting investor sentiment and potential oversupply concerns in certain regions.