The Census Bureau released July residential construction data on Tuesday. The headline numbers show a substantial uptick in housing starts. But at the same time, building permits for new construction were down year over year. Clear as mud, right?

July’s housing starts data may look rosy, but it’s just one month and one indicator. And a lot of that new construction was actually for apartments and condos. 

“I think this is just a natural consequence of the ongoing challenges for housing affordability in the for-sale space,” said Robert Dietz, chief economist at the National Association of Home Builders.

Higher mortgage rates continue to keep people from buying. And these priced-out, would-be homebuyers have to live somewhere.

“Housing affordability is challenged. Some of those prospective home buyers are remaining in the rental market longer than expected,” Dietz said.

While this looks like a good month for multifamily builders, permits for new construction paint a different picture, said Macrina Wilkins, a senior research analyst at the Associated General Contractors of America.

“The data suggests that we're in for a softer patch,” she said, because permits are trending down. “What that really means is builders are cautious about any future demand or the financial conditions that would impact consumers and their inclination to buy.” 

And overall builder sentiment for all residential construction is low. 

“Oh gosh. So so many, so many headwinds,” said Ali Wolf, chief economist at the real estate data firm Zonda. For one, there’s the higher cost of borrowing.

Also, “Construction costs are higher this year than where they were last year, and they were already high last year. And there's just a lot of questions of, ‘Well, what's going to happen to my construction costs? Do we already have the tariffs baked in? Are we going to see costs go higher?’” she said.

Throw in some additional uncertainty around the supply of construction labor because of current immigration policy, and pulling the trigger on new projects can be tricky.