Multifamily housing starts expanded

May 16, 2025

Housing starts, another name for new home construction, grew 1.6% with stronger multifamily starts. The three-month moving average barely budged in April. The Northeast and South led the gains.

Single-family starts fell 2.1% in April to 927,000 units, the lowest since July 2024. Starts are 12% lower than a year ago due to still-high mortgage rates and souring consumer sentiment. The latest Fannie Mae housing sentiment survey revealed that 31% of respondents believe their financial situations will worsen over the next 12 months. That is the highest share since early 2022 when the Federal Reserve raised interest rates at the fastest pace in decades.

Household delinquencies jumped to 4.4% in the first quarter of this year, driven largely by rising student loan delinquencies. The grace period for student loan repayment ended in the fourth quarter of last year; those who were late on payments are just now being reported to credit bureaus. The erosion of credit scores is adding insult to injury for those who are squeezed by loan payments. New mortgage delinquencies ticked up to 3.7%, the highest rate in ten years.

Builders targeting first-time and lower income borrowers tend to hold a higher share of unsold inventory. Larger, publicly traded builders have been able to offer more incentives to move their inventories faster. Consolidations are expected as margins get squeezed by rising input costs, some due to tariffs.

Multifamily starts jumped 11.1% to 420,000. The data are noisy; the three-month moving average was up to 387,000, the highest since February 2024. A shortage of apartments is expected by year-end due to strong rental demand. Builders have started to pull back from multifamily construction as they work through record backlogs.

Building permits, which signal future construction activity, dropped 4.7% on lower single and multifamily permits. Builders are pessimistic about current economic conditions; the home builder sentiment index as published by the National Association of Home Builders plunged to the lowest level since November 2023. Over a third of builders cut prices in May, up from 29% last month. The survey was conducted before the 90-day reduction of Chinese tariffs was announced.