Housing starts for single-family homes rose 6.7 percent in July and overall housing starts jumped 3.9 percent. This comes as existing home inventory has remained low. National Association of Home Builders CEO Jim Tobin joins Yahoo Finance Live to discuss the challenges facing the housing market.

The Federal Reserve's "efforts to crush inflation are in turn starting to crush demand in housing," Tobin says. High mortgage rates "are really keeping people on the sidelines." As people stay in their existing homes, it gives "new construction an outsized portion of the for sale market," Tobin says. "Construction looks good, but we're still facing the headwinds," as "lending for construction loans" are "very high, as well as construction costs and labor concerns continue to be a drag on new home construction and new apartment construction," Tobin explains.

Video Transcript

SEANA SMITH: Homebuilding activity accelerating in July as existing inventory for buyers remains historically low. Now, housing starts of single-family homes jumping nearly 7%, but as mortgage rates climb, could that put a dent in future construction? Here to talk a little bit more about that, we want to bring in National Association of Homebuilders, CEO, Jim Tobin.

Jim, it's good to see you here. So on the one hand, housing starts have really been the outperformer in today's real estate market, given the fact that inventory of existing homes is so low. But then you're also competing with the higher rates thus sidelining some buyers. So what does all this mean for construction and demand for construction going forward?

JIM TOBIN: Well, good afternoon. It's great to be with you. What it means is we're going to continue to see this kind of yo-yo effect from month-to-month with permits being up then they're down. Our HMI-- our Wells Fargo HMI, that's up and then it's down. So it's kind of a mixed bag.

I think what we are seeing is the Fed's efforts to crush inflation are in turn, starting to crush demand in housing. 7% mortgage rates are really keeping people on the sidelines, keeping people in their home-- their existing homes, which give construction kind of an outsized portion of for sale market or new construction outsized portion of for sale market.

So construction looks good, but we're still facing the headwinds. Mortgage-- sorry, lending for construction loans that continues to be very high as well as construction costs and labor concerns continue to be a drag on new home construction and new apartment construction.

AKIKO FUJITA: Yeah. I mean, single family homes there, they're the growth that we saw on that front, sort of outweighing the declines on the multi-family front. I mean, how sustainable is that cycle when you consider the demand? I mean, can we call it demand destruction because we are seeing mortgage rates push higher, that's sort of sidelining a lot of sellers as well as buyers.

JIM TOBIN: Demand is still there. It's just a question of reminding people that it's still a time to buy a home. If you are a credit worthy borrower, and you have some money to put down. It is worth getting into this market. And new construction is now a part of the market that people are starting to take a better look at.

And now it's time for our local lawmakers and our state lawmakers and our federal lawmakers to do everything they can to clear the way, whether it's government regulation or land use policies to help us continue to build that new product. Because, again, demand remains strong even despite these high interest rates.

And what we're seeing is on the new home market, we're starting to see our builders put in more incentives to attract people into the market with lowering prices or are doing right by Downs people are doing more and more our builders are doing more and more to get people into home ownership because they demand is high despite these mortgage rates

SEANA SMITH: Yeah, Jim, you've, been calling for the government to do a bit more to help make housing more affordable. From your conversations, are you confident that we'll see anything over the next several months, given the fact that some of the dynamics that you were talking about still makes it a pretty tough time for people to afford?

JIM TOBIN: Yeah. It at all levels with the government. We're talking all of the time. And the challenge is that everybody recognizes that housing affordability is a problem for most Americans out there, whether you're a first time home buyer-- a first generation home buyer or a family looking to move up it, is hard times out there.

So what we need to do is get lawmakers to find a way to speed up the permitting process-- stop with review after review after review and let our members build. But you also have the challenge right now, we're facing the headwinds of climate change as well and the regulations that the federal government is imposing on new construction specifically when it comes to energy codes and even resiliency codes.

I mean, there's so much cost that goes into a house, so much regulation that we need lawmakers to recognize that every regulation is going to add to the cost and drive people from a home ownership. We have to make a balanced decision about good regulations that do good for health, safety in the built environment, and be mindful of what it costs for people to own a home.

AKIKO FUJITA: What are those delays? I mean what kind of timeline are you talking about. And particularly around climate? Because there are new regulations that are being introduced every year as a result of the changes that we're seeing.

JIM TOBIN: Yeah, a lot of it has to do with the building materials that go into meet climate requirements. So for instance, 10 or 15 years ago a lot of wall and ceiling construction was 2 by 4 construction. Now, in order to meet some of the energy requirements and insulation requirements, you have to use 2 by 6 construction and 2 by 6s are more expensive than 2 by 4s.

That is a great example of just the cost of construction when it comes to energy efficiency. It has to do with our effort to try to meet climate change, sure. But we're not balancing home affordability when it comes to these issues. It's really frustrating times.

10 years ago, you could build an average single family home in about three months. Now it is stretched to eight months. And as yo know, time is money. Mortgage rates change in that time frame. So it's just delays and regulations really continue to be the biggest drag on the industry right now, especially when we talked about new home construction making up a bigger and bigger portion of for sale market.

SEANA SMITH: Jim, always great to talk to you. Jim Tobin, CEO of National Association of Homebuilders Thanks.