Housing construction took a definite hit in May as inflation reached new peaks and affordability remains challenged, as seen in recent data from the U.S. Department of Housing and Urban Development and the Census Bureau.
The latest New Residential Construction report saw housing starts clock in at a rate of 1,177,000 in May, down a whopping 15.4% from April’s rate of 1,392,000 (revised downward from the originally reported 1.47 million). New-home starts are also down 8.7% year-over-year, and have slipped to a six-year low.
Bill Owens, chairman of the National Association of Home Builders (NAHB), noted that this month’s decline was in line with the recent homebuilder confidence reading, which fell two points to 35, remaining negative as builders appear concerned about affordability and the state of the economy.
“Elevated mortgage rates, affordability challenges and cautious buyers continue to weigh on demand for new homes,” Owens continued. “Builders are offering incentives and cutting prices, but difficult market conditions are still limiting sustained momentum for new construction.”
Single-family starts were down 1.9% month-over-month and 6.7% year-over-year to a rate of 882,000. Multifamily starts, which have notoriously held strong and performed well in recent months, fell 41.6% month-over-month and 12.3% year-over-year to a rate of 284,000.
Regionally, the South and the West were down both month-over-month and year-over-year, while the Northeast was mixed and the Midwest remained surprisingly positive.
The South was down 17% month-over-month and 15.4% year-over-year to a rate of 594,000. The West was down 17.2% month-over-month and 11.4% year-over-year to a rate of 264,000. The Northeast was down 26.8% month-over-month to a rate of 123,000, but was up 18.3% year-over-year. The outlier, the Midwest, was up 3.7% month-over-month and 5.9% year-over-year to a rate of 196,000.
Housing completions were also down across the board in May, down 8.1% month-over-month and 14.2% year-over-year to a rate of 1,313,000. Single-family completions were down 1.6% month-over-month and 16.8% year-over-year to a rate of 872,000. Multifamily completions were down 19.3% month-over-month and 8.4% year-over-year to a rate of 426,000.
As with housing starts, the Midwest appears to be an outlier in housing completions as well. While the South, West and Northeast all recorded falls both month-over-month and year-over-year, Midwestern completions were up 29.7% month-over-month and 13.9% year-over-year to a rate of 205,000.
Building permits paint a slightly different picture for future reports. Permits saw only a 0.7% fall month-over-month and 0.2% fall year-over-year, with permits clocking in at a rate of 1,413,000. Single-family permits were up 0.6% month-over-month to a rate of 886,000, but were down 1.8% year-over-year. Opposite to single-family, multifamily permits were down 3.5% month-over-month to a rate of 474,000, but were up 3% year-over-year.
Permits were also up month-over-month and year-over-year across the Northeast, the South and the West, a possible sign of more activity in future months. On the other hand, the Midwest surprisingly saw month-over-month and year-over-year declines.
