• Building permits issued in May fell to 1,393,000 (SAAR). That’s 2.0% below the revised April rate and 1.0% lower than a year ago.
• Housing starts fell to 1,256,000 (SAAR) in May, up 9.8% from the revised April estimate and 4.6% lower than a year ago, according to the U.S. Census Bureau.
• Single-family housing starts increased slightly to 924,000 (SAAR) in May, rising 0.4% from the April estimate but 7.3% lower than in May 2024.

What happened: Housing starts fell in May to the lowest rate since May 2020. Amid persistently lower rent growth, multifamily starts sank 30.4% after rising for 3 consecutive months. Single-family housing starts also continued to trail year-ago levels. Fewer building permits suggest that the total number of homes started in 2025 could fall behind last year’s total. Housing starts fell in the Northeast and the South but increased in the Midwest and the West. 

Why this matters: Despite lower mortgage rates relative to year-ago levels, builders pumped the brakes on new projects this year. New home sales in April were still higher than in the same period last year. But just like with other sectors, economic uncertainty and a weaker labor market could cause demand to soften.

At the same time, resale inventory is at its highest level since July 2020. The increase in sellers listing their properties, combined with a steady supply of newly built homes, has given prospective buyers more bargaining power than in any May since before 2018. Slowing price growth — especially in many Sun Belt markets — could prolong a decline in new construction.

According to the National Association of Home Builders, the share of builders cutting their prices and the use of incentives are on the rise. In April, the price per square foot of new construction homes was up 3.4% from a year ago, a downshift from the 3.9% annual price growth in March, according to Zillow data.

Historically, rising housing inventory has been linked with more buyers entering the game. While home sales are expected to see a slight uptick in 2025, this year’s builder pullback could constrain future home sales.