WASHINGTON—Housing starts rose in July but building-permit issuance fell slightly, a possible sign of caution ahead among home builders despite historically low interest rates for home buyers.

Building permits issued for privately owned housing units ticked down 0.1% in July from the prior month to a seasonally adjusted annual level of 1.152 million, the Commerce Department said Tuesday. Permits had risen the prior three months. Construction typically starts within a month or two of a permit being issued.

Permits for residential construction fell 2.2% in the first seven months of 2016 compared with a year earlier, reflecting a 7.2% increase in permits for new single-family homes that was offset by weakness in the multifamily category.

Housing starts last month rose 2.1% from June to an annual rate of 1.211 million, slower than June's 5.1% gain. Starts in July remained just below their February level of 1.213 million.

Through July, starts in 2016 were up 6.7% from 2015, with strength in single-family construction offsetting a decline in apartment-building construction.

Economists surveyed by The Wall Street Journal had expected July permits at a 1.16 million annual rate and July starts at a 1.18 million pace.

Data on housing starts can be volatile from month to month and the figures are subject to later revision. Last month's 2.1% rise in starts came with a margin of error of 8.8 percentage points. The 0.1% fall for permits had a margin of error of 1.2 percentage points.

The housing sector this year has continued its long postrecession recovery. Sales of previously owned homes in June rose to their strongest pace since February 2007, according to the National Association of Realtors. New-home sales, which account for only about 10% of homebuying activity, rose 10.1% in the first half of 2016 compared with a year earlier.

Still, tight inventory remains a worry, and home sales may soften in the second half of the year. "We may just have hit peak levels," National Association of Realtors chief economist Lawrence Yun said last month.

News Corp, owner of The Wall Street Journal, also owns Move Inc., which operates a website and mobile products for the National Association of Realtors.

Interest rates remain at low levels, a boon for potential home buyers. The average rate on a 30-year fixed-rate mortgage in July was 3.44%, compared with 4.05% in July 2015, according to Freddie Mac.

The housing recovery provided a tailwind for overall U.S. economic growth through most of 2014, 2015 and early 2016. But a drop in residential fixed investment shaved 0.24 percentage point off the second quarter's 1.2% annual growth rate for gross domestic product, the Commerce Department said last month.

The Commerce Department's July report on new-home sales is due out on Aug. 23 and the Realtors group will release data on existing-home sales during July on Aug. 24.

Write to Ben Leubsdorf at ben.leubsdorf@wsj.com and Eric Morath at eric.morath@wsj.com

 

(END) Dow Jones Newswires

August 16, 2016 09:05 ET (13:05 GMT)

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