Single-family construction fell to an eight-month low in May, as elevated rates and rising import costs put builders under pressure
Single-family homebuilding in the United States fell to its lowest level since September 2025 last month, as high mortgage rates and rising construction costs continue to squeeze the new-home supply pipeline.
Data from the US Census Bureau and the Department of Housing and Urban Development, released Tuesday, showed single-family housing starts declined 1.9% in May to a seasonally adjusted annual rate of 882,000 units.
A concurrent 41.6% plunge in multi-family construction pushed overall starts down 15.4% to a pace of 1.177 million, the weakest reading in six years.
Residential investment has subtracted from gross domestic product for five consecutive quarters.
Builders hold back on new supply
The figures followed a National Association of Home Builders (NAHB) survey showing builder sentiment fell in June. Labor shortages and a scarcity of buildable lots continue to constrain output, limiting builders' ability to address a housing shortfall at the root of the country's affordability crisis.
Sal Guatieri, a senior economist at BMO Capital Markets, saw little reason for optimism. "There is little indication that US home building will break to the upside anytime soon, given high mortgage rates, previous over-building in the South, elevated new home inventories relative to sales, and the current depressed level of builder activity in the NAHB survey," he said.
Stephen Stanley, chief US economist at Santander US Capital Markets, offered a measured counterpoint, arguing the pullback may be corrective.
"This pullback should help to prevent an undesired backup in the inventory of new homes," he said.
As high mortgage rates continue to weigh on the US housing market, into the second half of 2026, the Mortgage Bankers Association projects the 30-year fixed rate will hold in the 6.1%–6.3% range through year-end.
Permits for single-family homes edged up 0.6% in May to 886,000, while overall permits dipped 0.7% to 1.413 million.
Import prices compound the pressure
A separate Labor Department report showed import prices rose 1.9% in May, nearly double the consensus forecast of 1.0%, driven by a 12.5% surge in fuel costs and a 1.3% rise in capital goods prices.
Over the 12 months through May 2026, import prices advanced 6.7%, the steepest annual gain since August 2022.
Tthe import data adds another layer of difficulty. The 30-year fixed rate has climbed more than 50 basis points since the US-Iran conflict began in late February, according to Freddie Mac's Primary Mortgage Market Survey.
Washington and Tehran reached a peace agreement Sunday, raising cautious hope that fuel-driven import costs may be nearing a peak.
Following April's sharp pullback in single-family construction activity, May's figures confirm the trend is entrenched. The Federal Reserve is expected to hold its benchmark rate in the 3.50%–3.75% range at its current two-day policy meeting, limiting near-term relief for buyers and builders alike.
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