Even as spring transitioned into early summer, single-family home construction in the U.S. remained stubbornly sluggish in May. According to the latest data from the U.S. Census Bureau, housing starts for single-family units rose just 0.4% from April, reaching a seasonally adjusted annual rate of 924,000. That’s still 7.3% lower than the same time last year — a worrying signal for a housing market already short nearly 4 million homes.
More concerning is the trend in building permits — a key indicator of future construction. Single-family permits dropped 2.7% from April and were down 6.4% year over year. The picture is even bleaker on the multifamily side: new starts plummeted 30% month-over-month, despite being 4% higher than in May 2024.
Together, these numbers mark the lowest level of overall housing starts since May 2020 — back when pandemic lockdowns brought construction activity to a halt. But this time, the cause isn’t a virus — it’s a mix of high interest rates, rising material costs, and geopolitical uncertainty.
“The ongoing trade war is raising the cost of materials, while tighter immigration policies are worsening already acute labor shortages,” says Danielle Hale, Chief Economist at Realtor.com. “At the same time, demand is weakening as more existing homes hit the market, giving buyers more choices and reducing the appeal of new construction.”
And builders are feeling the heat. A recent industry survey found that 40% of homebuilders cut prices in June to attract reluctant buyers, while 62% offered incentives like closing cost assistance or free upgrades.
“Confidence is low among builders,” says Buddy Hughes, Chairman of the National Association of Home Builders (NAHB). “Elevated interest rates are making it harder for buyers to qualify for loans — and tougher for builders to finance projects.”
NAHB Chief Economist Robert Dietz says his team now expects a full-year decline in single-family starts for 2025. In short, builders are scaling back.
Regional trends vary: housing starts (including both single- and multifamily) are up 21.1% in the Northeast and 10.8% in the Midwest. But they’ve dropped 6.8% in the South and 1.6% in the West — both traditionally high-growth markets.
Still, supply isn't the issue — at least not right now. As of April, there was more than an eight-month inventory of new homes on the market at current sales rates. That gives buyers more leverage in negotiations.
“With more existing homes coming online, prices in many markets have stabilized or even begun to dip,” says Lisa Sturtevant, Chief Economist at Bright MLS. “That gives buyers more options and more negotiating power.”
That’s exactly what buyers like Nick Anderson are waiting for. The 35-year-old software engineer from New Jersey sold his condo last fall and has been watching the market since. “I wanted a new build, but rates were sky-high and everything felt overpriced,” he says. “Now, I’m seeing price cuts and offers to buy down rates. I’m starting to reconsider.”
Still, builders aren’t in a position to hand out discounts forever. As Hale warns, “Even though buyers might have more options now, the slowdown in new construction means we could see tighter inventory a year from now — especially for move-in-ready homes.”
That’s already reshaping buyer behavior. Linda Smith, a retired teacher from Dallas, had originally planned to buy a brand-new single-family home close to her son’s neighborhood. “But everything I saw was either too far or too expensive,” she says. “In the end, I bought a fixer-upper in the city and spent the savings on renovations. It just made more sense.”
In many ways, the market is stuck in a paradox: demand is softening in the short term, but the long-term need for housing hasn’t gone away. As builders pull back on new projects and buyers bide their time, the supply-demand imbalance may only get worse down the road.
For policymakers, builders, and buyers alike, the next few months may determine whether the current slowdown is a temporary pause — or the beginning of a longer-term bottleneck.