The heat of summer usually signals a building boom, but this year, the sound of hammers is fading. U.S. home construction took a sharp dip in May as rising costs, economic pressure, and softer demand forced builders to slow down.
New data from the U.S. Census Bureau shows single-family housing starts dropped 7.3% compared to last year, while building permits fell 6.4%. Overall, including apartments and condos, housing starts plunged 9.8% from April marking the lowest level since the early COVID lockdowns. Completions, however, barely moved, ticking up by just 0.1%.
The building industry is facing a perfect storm. High financing costs, ongoing trade tensions, slower buyer interest due to elevated mortgage rates, and stiff competition from the resale market especially in states like Texas and Florid —are all weighing down momentum. Builders are also sitting on more unsold homes than before.
First American’s deputy chief economist, Odeta Kushi, said these combined pressures are hitting confidence hard. That’s backed by the National Association of Home Builders’ June survey, which showed builder confidence slipping to its third-lowest point in 13 years. Nearly 40% of builders are now slashing prices more than at any time since 2022.
Realtor.com’s chief economist, Danielle Hale, pointed to the trade war, labor shortages, and deeper fears about long-term demand as other forces behind the slowdown.
While mortgage rates have been dipping now averaging 6.81%, slightly lower than last year—many buyers remain on the sidelines. Joel Kan from the Mortgage Bankers Association said overall mortgage applications dropped 2.6% this week, with home purchase applications down 5%.
Hannah Jones of Realtor.com noted that conditions vary by region. Some Northern and Midwestern cities remain tight and competitive, while several Southern metros are flooded with inventory and seeing falling prices. Even with slightly improved affordability, hesitation is still the dominant mood in the market.
All signs suggest builders are holding their breath and their budgets while waiting for clearer skies.
