New residential construction in the U.S. took a significant step backward in May, raising fresh questions about where the housing market is headed for the rest of the year. According to data released today by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, housing starts fell 15.4% from April to a seasonally adjusted annual rate of 1.177 million units, well below the market estimate of 1.430 million and the lowest pace of new construction recorded since May 2020. April’s figure was also revised downward to 1.392 million from a previously reported 1.465 million, which makes the decline look even steeper when traced back a step.
The breakdown between housing types tells most of the story. Single-family starts fell a relatively modest 1.9% to an annualized pace of 882,000 units. The more jarring number sits in the multi-family segment, which covers buildings with five or more units. That category dropped from 529,000 in April to just 284,000 in May, nearly cut in half in a single month. Multi-family construction is historically more volatile, but a swing of that size is difficult to dismiss as noise.
Building permits, a forward-looking indicator of where construction is heading, offered only a marginally better read. Total permits came in at 1.413 million, slightly below the 1.420 million estimate and off 0.7% from April. Single-family permits edged up 0.6% to 886,000, a small signal that builders in that segment have not entirely pulled back. Multi-family permits fell from 514,000 to 474,000, continuing a pattern of softness in that category. Housing completions also declined, with total completions falling 8.1% from April to 1.313 million annualized units and running 14.2% below the May 2025 pace. Fewer homes are being started, and fewer are being finished, a combination that does little to ease an already strained supply picture for buyers.
The context behind these numbers matters. The 30-year fixed-rate mortgage averaged 6.52% for the week ending June 11, according to Freddie Mac, and the 10-year Treasury yield, which heavily influences long-term borrowing costs, sat at 4.441% this morning. That rate environment compresses demand on both sides: buyers stretch to qualify, and builders think twice before committing to new projects. A monthly payment on the median-priced home at today’s rates and a standard 20% down payment now consumes roughly 25% of a typical family’s monthly income, according to Bankrate.
Builder confidence, as measured by the National Association of Home Builders and Wells Fargo Housing Market Index, edged up three points to 37 in May but remains well in negative territory. A reading above 50 signals a healthy market; the index has sat below that level for 25 consecutive months. Regionally, the Midwest has shown the most resilience, while the South and West continue to face the most pressure. Nationally, nearly 70% of existing mortgage holders carry rates below 5%, according to Realtor.com data, making many potential sellers reluctant to list and trade into a higher-rate loan. That lock-in effect keeps the supply of existing homes constrained and limits relief for buyers even when new construction slows.
The May data reflects a market still absorbing a difficult combination of forces. The most financing-sensitive segment of construction pulled back sharply. The pipeline of completed homes is thinning. Permits suggest some resilience in single-family activity but no acceleration. With the Federal Reserve holding rates steady and long-term yields still elevated, meaningful near-term relief on borrowing costs is not a given. The housing market has been searching for its footing for more than two years, and today’s numbers suggest that search continues.
