New home construction dropped off in June after surging past economists’ expectations a month before, according to figures released by the Census Bureau on Wednesday. 

Privately owned housing starts fell to a seasonally adjusted annual rate of 1.43 million units last month, down 8 percent from the revised estimate in May at more than 1.55 million. 

Single-family starts also declined last month, falling by 7 percent from the previous month to 935,000, the data showed. Starts for buildings with five or more units was 476,000. 

Numbers picked up last month largely due to persistent lack of inventory in the existing market, which has pushed potential buyers toward new homes. Although existing sales picked up slightly in May, they were down more than 20 percent from a year ago. 

And this trend toward newly built homes continues to boost homebuilders’ confidence. 

Home builder confidence in the housing market grew for the seventh straight month, according to the National Association of Home Builders/Wells Fargo Housing Market Index. The index reached its highest level since June 2022. 

“The lack of resale inventory means prospective home buyers who have not been priced out of the market continue to seek out new construction in greater numbers,” NAHB Chairman Alicia Huey, said in a statement alongside the data’s release. 

“At the same time, builders are troubled over rising mortgage rates approaching 7% and continue to grapple with supply-side challenges, including ongoing scarcity of electrical transformer equipment and growing concerns about lot availability.” 

Mortgage rates have grown steadily in the weeks following the Federal Reserve’s decision to hold off on another rate hike. The benchmark 30-year fixed mortgage rate averaged 6.97 percent last week, reaching its highest level since November.