Housing starts plunged in May, driven by a sharp drop in new multifamily construction, according to HUD and the U.S. Census Bureau’s latest residential construction report released Tuesday.
The seasonally adjusted May starts rate for buildings with five units or more was 284,000, per the report. That’s down 41.6% from April’s adjusted number and a 12.3% decline from May 2025. Although the multifamily segment had the strongest construction performance in April, it had the weakest showing in May.
Total privately owned housing starts stood at a rate of 1.18 million in May, a 15.4% decline from the revised April estimate of 1.39 million and down 8.7% year over year. Single-family housing starts in May were down 1.9% from April's revised figure and 6.7% lower YOY.
By region, overall starts fell the most in the Northeast, dropping 26.8% from the previous month.
The West and South both saw yearly and monthly declines in overall start activity, while the Midwest was the only area that had monthly and yearly growth.
Multifamily building permits, which signal future construction activity, were at a seasonally adjusted rate of 474,000 in May, down 3.5% MOM but up 3% YOY. Overall, housing construction permits were down 0.7% month over month and 0.2% lower than May 2025. Those authorizations fell the most in the Midwest — down 10.6% YOY — and rose the most in the Northeast, up 7.2% YOY.
Multifamily project completions stood at a seasonally adjusted rate of 426,000, 19.3% lower than April and down 8.4% from the same period last year.
Lack of equity, high construction costs
Declines in housing starts and permits underscore continued challenges in the housing market, according to Jing Fu, National Association of Home Builders’ senior director of forecasting and analysis.
“While the Midwest has shown some resilience, lower permit activity indicates builders remain cautious about future construction amid economic uncertainty and affordability pressures,” Fu said in a June 16 NAHB analysis.
Multifamily developers are struggling to find enough equity to build new projects, leading them to pull back on construction plans, Bisnow reported. Rising materials prices are also likely a factor: In May, construction input prices increased at the fastest annual rate since the pandemic, according to analysis from the Associated General Contractors of America.
Construction materials costs increased 2.6% MOM and are now up 9.6% over the past year, driven by high fuel and metals costs. Tariff-sensitive materials, such as steel and copper, continued to post price gains in May, per AGC, and all construction input costs have gotten more expensive every month this year.
The tentative deal to end the war in Iran should bring down fuel costs, although it will likely take awhile, according to AP News.
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