(June 16): New residential construction in the US slowed to the weakest pace in six years, driven by a steep decline in apartment projects.
Housing starts decreased 15.4% in May to an annualized rate of 1.18 million, federal data released Tuesday showed. That trailed all estimates of economists surveyed by Bloomberg.
That decline was led by a 40.2% plunge in multifamily starts. Starts of single-family homes also fell, by 1.9%, to an annualized 882,000 houses.
Tuesday’s report shows contractors are still showing restraint as they work down the supply of new homes for sale amid sluggish demand. Many have cut prices and subsidised customers’ mortgage rates to find buyers, while builders also have slowed production of “spec homes”, which are houses built without a signed contract in hand.
Total building permits, which point to future construction, fell 0.7% in May to an annualized rate of 1.41 million. Permits for one-family homes rose slightly.
President Donald Trump has tried to prod builders to increase home production, hoping to improve affordability ahead of the midterm congressional elections. The president has taken to social media to blast homebuilders for “sitting on two million empty lots” and proposed banning institutional investors from buying single-family rental homes. Legislation that would curb investor home purchases, although weakened from its original form, is pending before Congress.
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All regions saw a drop in construction, except the Midwest. In the South, the biggest homebuilding region, starts fell to the lowest since May 2020, driven by a sharp decline in apartment buildings.
The new residential construction data are volatile, and the government report showed 90% confidence that the monthly change ranged from a 25.2% drop to a 5.6% decline.
The National Association of Realtors will provide a look at the home resale market on Wednesday with its release of the pending home sales report for May.
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