Market commentator The Kobeissi Letter said on Thursday that U.S. housing starts, which track when construction officially begins on new residential buildings, fell sharply in May, signaling a slowdown in residential construction as both single-family and multifamily building activity weakened.
Kobeissi said housing starts dropped 15.4% month-over-month to a seasonally adjusted annual rate of 1.18 million units, the lowest level since May 2020. April’s reading was also revised lower by 73,000 units from the previously reported 1.39 million.
The latest reading also came in well below the five-year average of 1.44 million units, highlighting the broader slowdown in construction activity.
“Residential construction activity is rapidly slowing,” Kobeissi said.
Multifamily Construction Drives Decline
Kobeissi said the biggest drag came from multifamily construction.
Housing starts for buildings with five units or more fell 40.2% month over month to 284,000 units annualized, marking the lowest level since November 2024.
Single-family housing starts also declined more modestly, falling 1.9% to 882,000 units, the lowest since September 2025.
The data cited by Kobeissi came from the Monthly New Residential Construction report jointly released Tuesday by the U.S. Census Bureau and U.S. Department of Housing and Urban Development. The report showed total housing starts fell to 1.177 million, down 15.4% from April and 8.7% from a year earlier.
Building permits, a key indicator of future construction activity, slipped 0.7% to 1.413 million, suggesting builders may remain cautious in coming months.
Housing completions also fell 8.1% month over month and 14.2% year over year, signaling broader weakness across the housing market.
Housing Affordability Remains Under Pressure
Elevated mortgage rates and affordability pressures continue to weigh on buyer demand across the housing market.
Housing pressure has also been building for buyers. A recent Zillow analysis found starter homes now cost at least $1 million in 242 U.S. cities, nearly triple the number seen in early 2020.
Economist Mohamed El-Erian has also described the U.S. housing market as “extremely unaffordable,” noting buyers now spend roughly 42% of their income on housing costs.
Sen. Elizabeth Warren (D-Mass.) recently backed the 21st Century ROAD to Housing Act, a bipartisan housing bill aimed at boosting supply and lowering housing costs by limiting large private equity purchases of single-family homes.
Disclaimer: This content was produced with the help of AI tools and was reviewed and published by Benzinga editors.
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