U.S. homebuilding dropped 4% in July to a seasonally adjusted rate of 1.19 million units, resulting in a shortage of available homes for buyers, the Commerce Department said Friday.

Home construction fell in the Northeast, Midwest and Southern regions but increased 1.3% in the West. So far, housing starts declined 3.1% this year.

"A dearth of cheap lots and persistent labor shortages are constraining builders, especially for houses costing less than $300,000, which have the highest demand," Robert Frisk, a corporate economist at the Navy Federal Credit Union said. Although mortgage rates are low, Frisk said they are not enough to revive the U.S. homebuilding market.

According to Freddie Mac, the 30-year fixed mortgage rate has fallen to 3.6% from a peak of 4.94% in November.

"In theory, low mortgage rates combined with solid economic fundamentals such as low unemployment and strong consumer spending should be buoying the housing market, but the effects of the stimulus have been muted in this segment of the market," said John Pataky, TIAA Bank Executive Vice President.

On the positive side, building permits for new homes rose 8.4% in July to 1.34 million.

"The number of permits did rise, but given the demand, it will only have an incremental effect on new homes built down the road," Frisk said.

Although consumer confidence remains strong, the economy has faced signs of fragility, as the bond market felt an inverted yield curve last week, prompting the worst day for the stock market in 2019.

The Federal Reserve under Jerome Powell recently cut interest rates in a bid to boost the U.S. markets amid a slowing global economy and multiple trade wars. President Trump frequently has criticized Powell for raising rates during the last year, calling him "clueless."

Powell has been increasing rates as a way to curb inflation during a strong economic period, which economists call contractionary monetary policy.

GDP growth slowed to 2.1% in the second quarter from April to June, the lowest since Trump took office in January 2017.

RELATED STORIES
Trump