(fxcue news) - New residential construction in the U.S. saw a steep drop in the month of July, according to a report released by the Commerce Department on Friday. The report said housing starts plunged by 6.8 percent to an annual rate of 1.238 million in July after jumping by 1.1 percent to a revised rate of 1.329 million in June. Economists had expected housing starts to slump by 1.7 percent to an annual rate of 1.330 million from the 1.353 million originally reported for the previous month. With the sharp pullback, housing starts tumbled to their lowest level since hitting an annual rate of 1.053 million in May 2020. Single-family housing starts led the way lower, plummeting by 14.1 percent to an annual rate of 851,000 in July after edging down by 0.1 percent to rate of 991,000 in June. On the other hand, multi-family starts soared by 14.5 percent to an annual rate of 387,000 in July after surging by 4.6 percent to a rate of 338,000 in June. The Commerce Department said building permits also dove by 7.0 percent to an annual rate of 1.396 million in July after surging by 3.9 percent to a revised rate of 1.454 million in June. Building permits, an indicator of future housing demand, were expected to decrease by 1.1 percent to an annual rate of 1.430 million from the 1.446 million originally reported for the previous month. Single-family permits edged down by 0.1 percent to an annual rate of 938,000, while multi-family permits plunged by 11.1 percent to an annual rate of 458,000. "Compared to history, this pace is not slow, but it's also not fast," Nationwide Economist Daniel Vielhaber said of the July housing starts report. "While still solid, permits for single-family homes have fallen substantially since earlier in the year, while the pace of multifamily starts is just ok." He added, "Home builder sentiment declined for a fourth straight month in August to an eight-month low, which suggests we could see more weak home builder data in coming months." On Thursday, the National Association of Home Builders released a separate report unexpectedly showing a continued deterioration in U.S. homebuilder confidence in the month of August. The report said the NAHB/Wells Fargo Housing Market Index fell to 39 in August from a downwardly revised 41 in July. The dip surprised economists, who had expected the index to inch up to 43 from the 42 originally reported for the previous month. The housing market index decreased for the fourth consecutive month, falling to its lowest level since hitting 37 last December.