Housing Starts Fall to Lowest Level in 13 Months, 7 Percent Monthly Fall in Building Permits

Housing under construction at a development in Novato, Calif., on March 23, 2022. Justin Sullivan/Getty Images

U.S. homebuilding fell to its lowest level in 13 months in May, according to the latest monthly new residential construction data released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development.

“Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,549,000,” a June 16 press release said. “This is 14.4 percent below the revised April estimate of 1,810,000 and is 3.5 percent below the May 2021 rate of 1,605,000. Single‐family housing starts in May were at a rate of 1,051,000; this is 9.2 percent below the revised April figure of 1,157,000. The May rate for units in buildings with five units or more was 469,000.”

Region-wise, the Northeast and Midwest saw a monthly increase of 14.6 percent and 1.9 percent respectively in housing starts, the South a decline of 20.7 percent, and the West a decline of 17.8 percent.

Over a 12-month period, housing starts in the Northeast grew by 26.3 percent while the Midwest, South, and West saw declines of 17.5 percent, 0.7 percent, and 10.1 percent respectively.

Privately owned housing units authorized by building permits fell by 7 percent to 1,695,000 units in May on a seasonally adjusted annual rate from April’s 1,823,000 units. May numbers were up by 0.2 percent over May 2021.

On a monthly basis, building permits declined by 20.2 percent in the Northeast, 7.6 percent in Midwest, 4.7 percent in the South, and 7.1 percent in the West.

The softening in housing starts and building permits is happening as mortgage rates climb. For the week ending June 15, the average interest rate on a 30-year fixed-rate mortgage was 5.78 percent, jumping over half a percentage point from the previous week to mark the largest one-week rise since 1987, according to data from Freddie Mac.

The organization attributed the rising mortgage rate to a “shift in expectations” about inflation and the course of monetary policy. Freddie Mac expects the higher mortgage rates to “lead to moderation from the blistering pace of housing activity” seen since the pandemic recovery. This would ultimately result in a “more balanced” housing market, it said.

The continued rise in mortgage rates is forcing prospective home buyers into a tough position, Hannah Jones, Economic Data Analyst at Realtor.com, told CNN. She also believes home price acceleration is showing signs of steadying.

“Should home completions ramp up, buyers will see some relief in the form of increased housing supply,” Jones said. “Despite lower near-term housing demand, the need for new construction remains pressing to close the sizable decade-long housing supply gap and create a more favorable environment for buyers.”