Housing Starts Plummet

Housing starts plummeted 10% in May to their lowest level since 2020, the U.S. Census Bureau reported Wednesday.

The report fell short of consensus expectations.

Starts fell 4.6% from the same period last year, Census reported.

The month-over-month pull back was primarily due to a drop in the volatile multifamily groundbreaking, while a decline in single-family building permits points to a weaker trend moving forward.

“The steep drop [in housing starts] 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,” First American Deputy Chief Economist Odeta Kushi noted.

“Builders face 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,” Kushi said. “This mix is weighing on builder sentiment and likely to slow single-family construction.”

Kushi noted the weak construction data contrasts sharply with strong new-home sales in April, which made up the highest share of total sales since 2005. “Consider that new-home sales might offer a better deal for buyers than existing homes,” she said. “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 ($407,200) was actually lower than the median price of an existing home ($414,000), partly due to price cuts and builders constructing smaller, less expensive homes.”