Starts in new-home construction dropped 2.5 percent in July, according to figures released Aug. 16 by the Commerce Department.

The numbers signal the continued orderly cool down of the housing market. Housing starts declined to a seasonally adjusted annual rate of nearly 1.8 million units, 13.3 percent below the peak pace of a year ago.

Single-family housing starts were down 2.3 percent for the month to a pace of 1.4 million units, a 16.6 percent drop from July 2005.

Multifamily housing construction was down 3.4 percent for the month to a seasonally adjusted pace of 343,000 units.

“The moderate decline in starts was anticipated and shows that builders are adjusting to changing market conditions,” said NAHB President David Pressly in a news release. “The drop in permits shows that builders are not planning to start as many homes in the near future, and many are offering incentives to prospective buyers in order to control their current inventory positions.”

Regionally, housing starts generally mirrored the national decline as three of four regions reported decreases for the month. Construction of new homes and apartments was down 2.5 percent in the South and 2.9 percent in the West. The decline in the Northeast was deeper at 7 percent. In the Midwest, housing starts rebounded a slight 0.7 percent for the month, but were 16.6 percent below July 2005.

“We expect the downswing in starts and permits to continue for several months, although solid economic fundamentals, a favorable financing environment, and widespread use of sales incentives will limit the degree of decline,” said NAHB Chief Economist David Seiders. “We are currently projecting a 9.4 percent decline in total housing starts for 2006, with single-family starts off by 10.8 percent from the record level in 2005.”