Housing starts in May fell to a seasonally adjusted annual rate of 1.256 million, down 9.8% compared with April and down 4.6% compared with May 2024, driven mainly by a sharp decline in multifamily production, according to the U.S. Census Bureau.
It was the lowest overall production rate since 2020.
The drop came as home builder sentiment fell to the lowest level since 2012.
Starts of detached single-family homes in May were at a rate of 924,000, an increase of 0.4% compared with April.
Starts of multifamily properties (five units or more per building) were at an annual rate of 316,000, a decrease of 30.4% compared with the previous month.
Building permits were also down. They were at an annual rate of 1.393 million, a decrease of 2.0% compared with April and down 1.0% compared with May 2024.
Permits for single-family homes were at a rate of 898,000, down 2.7% compared with April.
Authorizations for multifamily dwellings were at a rate of 444,000 in May, an increase of 1.4% compared with the previous month.
Housing completions were at a seasonally adjusted annual rate of 1.526 million, an increase of 5.4% compared with April but down 2.2% compared with May 2024.
“Our latest builder survey shows that development and market conditions remain a major concern for builders, with consumer confidence lower and elevated interest rates for buyers and builders,” says Buddy Hughes, chairman of the National Association of Home Builders (NAHB), in a statement. “Almost 40 percent of home builders reduced sales prices in the last month in order to offset difficult housing affordability conditions.”
“Single-family permits and construction starts are down on a year-to-date basis for 2025 for what has been a disappointing spring housing market, given ongoing elevated mortgage interest rates, challenging housing affordability conditions led by higher construction costs, and macroeconomic uncertainty,” adds Robert Dietz, chief economist for NAHB. “We’re forecasting that 2025 will end with a decline for single-family housing starts.”
In a separate statement, Odeta Kushi, chief economist for First American, says the steep drop in production “is not entirely surprising considering that builder sentiment in June reached one of its lowest levels in 13 years, the only exceptions being April 2020 and December 2022.”
“This growing builder pessimism was widespread across all HMI components,” Kushi says. “Optimism about single-family sales for the next six months dropped by two points, and current sales conditions also fell by two points, marking the lowest level since June 2012. Prospective buyer traffic decreased from 23 to 21.”
“The weak construction data contrasts sharply with strong new-home sales in April, which made up the highest share of total sales since 2005,” Kushi says. “Consider that new-home sales might offer a better deal for buyers than existing homes. Historically, new homes are priced at a premium relative to existing homes, but that gap has flipped. In April, the median price of a new home, at $407,200, was actually lower than the median price of an existing home, at $414,000, partly due to price cuts and builders constructing smaller, less expensive homes.”
“The latest HMI survey data bears this out, revealing that 37 percent of builders reported cutting prices in June, the highest percentage since NAHB began tracking this figure monthly in 2022,” she says. “Additionally, the use of sales incentives increased to 62 percent in June, up one percentage point from May.”
Kushi further notes that home builders are currently facing higher financing costs, tariff uncertainty, softer demand from elevated rates, increased competition from rising existing-home inventory in key markets like Texas and Florida, and higher inventories of their own.
“This mix is weighing on builder sentiment and likely to slow single-family construction,” she says.
Photo: Avel Chuklanov