New residential construction dropped 14.4% in May, as single-family starts fell for the third month in a row, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development said in a press release.
New construction of single-family homes dropped 9.2% from April’s revised estimate to 1,051,000, while multifamily starts plunged 26.8% to 469,000. On a yearly basis, construction was down as well, with single-family starts falling 5.3% and multifamily dipping 3.3%.
Altogether, the combined construction pace of single-family homes and buildings with five or more units was down 3.5% year over year, at 1,549,000 units.
“Uncertainty around quickly changing economic conditions has caused sentiment in the building industry to falter, and housing starts slowed in reaction to these factors, as well as in light of persistent supply-chain issues,” RCLCO Real Estate Consulting principal Kelly Mangold said. “However, the job market continues to perform strongly, and millennials continue to move into family-formation years, indicating that there is likely still pent-up demand for housing — though some may be taking a more ‘wait-and-see’ stance until conditions settle down.”
There was good news on the new-home completion front, however. Privately owned housing completions hit an annual rate of 1,465,000 in May, 9.1% higher than April and 9.3% above the previous year.
“The growth in completions means more homes on the market in the short-term, offering some immediate relief in alleviating chronic housing supply shortages,” First American Financial deputy chief economist Odeta Kushi said. “Builders are responding to the decline in affordability and cooling demand by building less, but a slowdown in construction is concerning because the U.S. continues to face a housing shortage. We need more homes, not less.”
The seasonally adjusted annual rate for privately owned housing units authorized by building permits was at 1,695,000 in May, down 7% from April and up 0.2% from a year earlier.
By region, single-family new home construction varied widely across the U.S. On a month-over-month basis, it fell 20.7% and 17.8% in the South and West, respectively, but rose 14.6% and 1.9% in the Northeast and Midwest.