Overall housing starts plunged in May to an eight-month low, fueled by a sharp slowdown in multifamily activity and ongoing pressures facing the single-family sector.
Last month, U.S. home builders broke ground on new projects at a pace more than 15% slower than April and nearly 9% slower than a year ago, according to data published Tuesday by the U.S. Census Bureau and Department of Housing and Urban Development.
Single-family housing starts subsequently declined 2% on a monthly basis in May to post a 6.7% annual decline. Multifamily starts fell 41% monthly to land 12% lower over the year.
Depressed home building activity this spring has led economists to caution that new residential construction will likely be a drag on the U.S. economy in 2026, following what was an overall disappointing year for single-family construction in 2025.
Persistent homebuying affordability pressures have slowed the pace of new-home sales, which were 11% slower than a year ago in April. Home builders have few incentives to bring more units online while existing backlogs of completed homes continue expanding.
Months’ supply of new homes for sale — a measure of how quickly existing inventories would deplete at a given sales pace — registered at 9.4 months in April, 9.3% higher than last April.
As a measure of forward-looking construction activity, permit applications for single-family homes rose 0.6% from April to May but remained about 1.8% lower than a year ago. Multifamily permits were 3.5% lower over the month but 3% higher than a year ago as a wave of new apartment units continue to bring down rents nationwide.
Completions of newly built single-family units, meanwhile, were 16.8% lower over the year in May, while multifamily completions were down 8.4% annually.
Though improved from year-ago levels, homebuyers have ultimately faced worse affordability this spring compared to the start of the year, brought on by higher mortgage rates from accelerating inflation caused by the Iran war.
Squeezing the sectors’ margins at both ends, the war has caused fuel and building material costs to spike, eroding sentiment across the new-home construction sector as builders face mounting pressures, though renovation activity has remained a bright spot.
On Monday, the National Association of Home Builders (NAHB) and Wells Fargo updated their jointly produced Housing Market Index (HMI) for June, which tracks home builder sentiment concerning present and future sales conditions.
The HMI declined two points in June to 35, reversing a three-point increase recorded last month. The index, which bifurcates majority-positive and majority-negative sentiment on a scale from 0 to 100, has not crossed above 50 since April 2024.
In fact, the index has not crossed 40 since April 2025, indicative of the persistent gloom affecting builder outlooks amid high financing costs and slow sales. More builders slashed prices in June than May, with 35% of respondents to the NAHB survey reporting price cuts compared to 32% the previous month.
Across the HMI’s component indexes, the measure tracking current sales conditions declined two points to 38, while the index tracking six-month sales expectations remained unchanged at 45. The index for traffic of prospective buyers was also unchanged at 25.
