May Housing Starts: Bottleneck of Homes Finding its Way to Market Amid Affordability Woes

• May housing starts totaled 1.55 million (SAAR), down 14.4% from April 2022 and down 3.5% from May 2021, according to the U.S. Census Bureau.
• Housing permits issued in May were down 7.0% from April and up slightly (0.2%) from a year ago, to 1.7 million (SAAR).
• 1.47 million (SAAR) homes were completed in May, up 9.1% from April and up 9.3% year-over-year.

With a very competitive housing market this spring, builders continued to keep their pace of housing starts above levels not seen in the decade prior to 2020. Though in the face of quickly rising interest rates, and a related cooling of buyer demand, some builders may be beginning to pull back their plans with declines in permits for the second month in a row, and a much steeper drop than the consensus. Builders are expressing pessimism about the state of the housing market, marking their lowest levels of confidence in future sales since the start of the pandemic. Supply and labor challenges continue to impact builders’ ability to complete projects in a timely fashion – both planned housing units authorized but not yet started and the number of units under construction are sitting at higher than normal levels. And despite a growing reserve of units under construction, the pace of completed houses increased after two months of declines, signaling the bottleneck of new homes in the funnel is finding its way to the market. Builders thus far are weathering the challenges blowing their way, and given the need for new housing across the nation, unlocking the congestion of not yet completed homes and continuing to start new units is a crucial building block in helping ease affordability constraints worsened by years of underbuilding following the Great Recession.