Housing starts fell significantly in May, as the residential construction sector continued to grapple with high material costs, persistent labor shortages and slowing demand from homebuyers.
In the latest report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, new housing starts were down 9.8% from April to a seasonally adjusted annual rate of 1.256 million in May, down 4.6% from last year, marking a five-year low.
Single-family housing starts in May reached 924,000, up 0.4% from April’s rate of 920,000. The rate for units in buildings with five or more units was 316,000.
Building permits also slipped, with a total of 1,393,000 permits in May, down 2% from April’s rate of 1,422,000 and down 1% from the 1,407,000 permits in May 2024.
The five-year lows in both permits and starts underscore the effects of the current trade war on homebuilding, augmented by worsening labor shortages and growing concerns from builders about demand, said Realtor.com® Chief Economist Danielle Hale.
“With tariffs raising materials costs and immigration policy likely worsening labor shortages, the supply side of the equation is difficult, and coupled with an environment where demand for new construction homes is weakening as the number of existing homes for sale grows,” Hale said. “Builders are increasingly cutting prices and offering incentives, according to the NAHB sentiment indicator.”
Referencing the increasing pessimism of homebuilders in the sentiment index, Bright MLS Chief Economist Lisa Sturtevant said the price cuts from builders—mixed with the increased inventory of existing homes, along with their stabilizing or, in some markets, declining prices—are giving buyers more options.
“It is likely that home building will continue to be slow in 2025, potentially tracking behind last year’s level,” Sturtevant added. “With a rise in the inventory of existing homes, more than eight months of supply in the new home market, and builders offering price concessions, there may be opportunities for some buyers who are in the market this summer to find opportunities in new home developments.”
Regionally, the South led in housing starts, with 693,000 starts in May, 526,000 of which were single-unit. The West followed with a total of 274,000 housing starts. The Midwest and Northeast had 184,000 and 105,000 housing starts, respectively.
Month-over-month, the only region with an increase in housing starts was the West, with a 15.1% increase in starts from April. The Northeast experienced a 40% decline. The South and Midwest saw 10.5% and 10.2% drops, respectively.
Looking at permits, the South had 743,000 permits authorized in May. The West, Midwest and Northeast had 313,000, 213,000 and 124,000 respective authorizations.
