Builders are on track to construct the fewest single family homes in history this year. Total housing starts in July were down 1.7 percent, month to month, which may not sound like a lot, but when you break the number down, you see the problem.

Single family starts were down 4.9 percent, while Multi-family starts rose 6.3 percent. Rental demand continues to rise, as consumer confidence in homeownership was decimated yet again by the recent debt turmoil in the economy.

I am reporting these numbers today from a construction site. Mid-Atlantic Builders of Rockville, MD is putting up the last phase of a large single family development out in Bowie, MD, which is about 15 minutes outside the DC Beltway. They are a mid-sized builder, about 40 to 50 homes a year, which is about a third of the business they did just five years ago.

They are now smaller, leaner, but surviving thanks to their location near DC, where unemployment is low, relative to the rest of the country. Business was even starting to pick up last winter, according to executive VP Stephen Paul.

“We started what we call the spring market in February. We started out very strong, we had a good February, March, even into April. What started to cause consumer confidence to wane was the escalation of gas prices, the debt issue with the government, and what’s going on in Europe.”

In other words: Confidence.

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Last month, the National Association of Realtors reported a huge jump in cancellations of pending home sale contracts. 16 percent of contracts didn’t make it to closing, up from a norm of about 4 percent.

The chief economist at the NAR said he was baffled by it, but ask any agent working the nation’s neighborhoods, and they’ll tell you it is all about confidence and financing—specifically, a lack of both.

“It seems like everybody’s got home purchase ‘cancel-itis,’” says David Fogg, a real estate agent in Burbank, Calif.

“Currently, we are seeing about 75 percent, when we close escrow, had been in escrow 2 or 3 times prior.”

Fogg says the higher cancellations recently are most definitely tied to the turmoil in Washington, D.C. over the debt ceiling . Already nervous buyers are suddenly changing course, unsure how the debt crisis will affect the overall economy, and more importantly, their own employment.

More buyers did sign sales contracts in June than in May, though, according to a new report from the National Association of Realtors. Pending home sales rose 2.4 percent month-to-month and are nearly 20 percent* higher than June of 2010, the low point following the end of the home buyer tax credit.

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With all the turmoil and unknown in the markets, investors today may be searching for a safe-haven. U.S. real estate wouldn’t exactly sit at the top of the list for most, given the still uncertain state of the housing and credit markets, but there is one sector that seems to have fundamentals and sentiment on its side: Apartments.

We’re in Boston, MA today for day two of the Spring Realty Check: Opportunity Knocks. Boston is home to Avalon Bay, one of the largest apartment REITs in the nation. It’s revenues were up 8 percent year over and shares are up 34 percent from a year ago. It’s the upside to the downturn in housing. Many people who lost their homes to foreclosure have been forced to the rental market, others who are unable to get a mortgage are doing the same, and still others who would have headed toward home ownership have been scared away from the market by still falling prices. In turn, apartment vacancies are down, rents are up and REITs are reaping the rewards.

We interviewed a young couple in Boston, fiancées, and I think their insights are indicative of so many around the country.

“A lot of people are scared to buy just because if they have to move or things change, you lose money on the house and you might not be able to sell it. In my mind it’s just easier and more safe to rent.”

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