Rate of starts has not been this slow for four years
May saw new home construction across the US hit its slowest pace since 2020, with high interest rates and borrowing costs continuing to weigh down on the housing industry.
Government data released Thursday showed that housing starts slid by 5.5% last month, coming in at a 1.28 million annualized rate, with building permits – a key gauge of future construction – dropping by 3.8%.
The pace of overall starts and building permits has not been this low since June four years ago, when the economy continued to reel from the recent onset of the COVID-19 pandemic.
Authorized permits for single-family homes fell for the fourth month in a row, while multifamily and single-family units both saw starts and permits dip.
The construction sector’s continuing sluggishness arrives with the Federal Reserve maintaining a hawkish stance on interest rates and giving little indication that it’s considering a rate cut in the coming months.
Mortgage rates are still hovering stubbornly around the 7% mark, although expectations are high that the central bank will cut its key rate at least once before the end of the year – potentially in the fall.
But with no sign of an imminent dip, homebuilder sentiment remains low across the country. The National Association of Home Builders (NAHB) reported this week that its NAHB/Wells Fargo Housing Market Index, a measure of optimism in the construction industry, had slid to its lowest point since December 2023.
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