Housing struggles to gain ground

May 21, 2026

Housing starts fell 2.8% in April, pulled down by a sharp retreat in single-family construction. Those losses more than offset a jump in multifamily activity. Overall starts remained 4.6% above year-ago levels but gains were uneven. The South, the largest housing market, posted a drop from a year ago as other regions posted increases. 

Single-family starts plunged 9.0% in April and slipped 2.4% below year-ago levels with every region experiencing losses. The high-water mark for the year, just over one million units, was in March. Elevated mortgage rates, persistent affordability concerns and broader economic uncertainty are all weighing on buyer demand, forcing builders to discount to move inventory. Around 60% of builders offered some type of sales incentive in May, a share that has held for 14 months consecutive months. Margin pressures are limiting the size of discounts and the share of builders who can afford to offer discounts.

Multifamily starts surged 14.3%, though month-to-month swings are notoriously volatile. The pace increased a more modest 4.1% on a three-month moving average basis, a more accurate way to gauge activity. Only the South lost ground in multifamily construction activity.  Years of record completions have pushed rents lower and cooled builder appetite for new apartments, but household formation is putting a floor under how low rents can go. 

Building permits, an indicator of future construction activity, jumped 5.8% in April but March permits were revised lower. The April increase was driven entirely by multifamily. Single-family permits fell 2.6%, 5.5% below year-ago levels and the softest reading since August 2025. Weak foot traffic and sales conditions continue to make builders pessimistic, according to a recent survey. 

The housing market showed potential to be a source of economic growth at the start of the year. Mortgage rates had dipped below 6% in February while refinancing activity hit its highest level since March 2022. The Iran war shut that window. Energy costs surged, rates reversed and purchase applications fell back. The pullback shows up directly in consumer spending: furniture and home store sales dropped 2.0% in April and 3.6% below year-ago levels, consistent with a buyer pool that has stepped back. 

The consumer backdrop is not encouraging: real wage gains have turned negative as the saving rate has fallen to 2022 levels. Serious credit card delinquencies are nearing levels not seen since the Great Recession.