US housing starts rebounded in June on the strength of multifamily building, while weakness in the larger single-family market pointed to ongoing struggles with bloated inventories and affordability constraints.

New residential construction increased 4.6% to an annualized rate of 1.32 million homes last month, picking up after an almost 10% slide in May, according to government figures released Friday.

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While apartment contractors were busier, the overall malaise in new-home construction is a sign builders are slowing their investment as they work to clear inventory that’s ballooned to a more than 17-year high. Developers are now competing with a growing supply of previously owned homes as well, as homeowners have come to terms with mortgage rates near 7% and list their properties for sale.

Builders have responded by cutting prices and offering sales incentives, which is also sapping some of their motivation to build.

Last month, single-family starts decreased to an annualized pace of 883,000, one of the slowest paces since early 2023, government data show. Multifamily starts increased 30% after falling by a similar magnitude in the prior month.

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The figures wrap up the second quarter, suggesting residential investment will likely be a slight drag on gross domestic product. Before the report, the Federal Reserve Bank of Atlanta’s GDPNow forecast projected the sector would subtract the most from overall economic growth since the end of 2022.

“A further fall in homebuilding in the second half of this year looks set to drive a small drop in overall real residential investment of about 1% in 2025, a far cry from last year’s 4% increase,” Samuel Tombs, chief US economist at Pantheon Macroeconomics, said in a note.

By 2026, some of the headwinds facing builders will be behind them, possibly including mortgage rates and uncertainty over President Donald Trump’s tariff policies, Nationwide Senior Economist Ben Ayers said in an interview earlier this week. For now, though, “there’s just just not much room for much optimism in the second half of 2025,” he said.

Bearing that out, building permits for single-family homes, which point to future construction, fell for a fourth straight month to a more than two-year low. And one-family homes under construction extended a decline stretching back three years, government data show.

Single-family home construction fell across the country, dragged down most by the West and South — the two largest homebuilding regions.

The new residential construction data are volatile, and the government report showed 90% confidence that the monthly change ranged from a 6% drop to a 15.2% gain.

The National Association of Realtors will provide a look at the home resale market on Wednesday, when it releases its report on June existing-home sales.