Housing remains in the doldrums

June 16, 2026

New home construction, also known as housing starts, plunged 15.4% in May after April starts were revised lower. Starts have fallen to their lowest level since May 2020, when the pandemic lockdowns were in effect. All regions except the Midwest posted losses for the month.

Single-family starts slipped 1.9% to 882,000, with losses concentrated in the South and West. The slip is modest, but it occurred during what should have been the busy spring selling season. Rising mortgage rates have sidelined would-be buyers. Builders are responding to the thinner traffic.

Multifamily starts (5+ units) plunged 41.6% to 284,000. The series is noisy, so the three-month average is the more useful read; it fell 11.8%, the steepest in over a year. Builders have pivoted away from apartments after record supply came on line.

Home builder sentiment remains in the doldrums. The NAHB sentiment index fell further into pessimistic territory in June, the 14th straight month and the longest such streak since 2011-2012, during the foreclosure crisis. In June, 35% of builders cut prices, up from 32%. The average discount held at 6%. Sales incentives ran at 62%, the 15th consecutive month above 60%. Builders are not winning buyers on rate or price levels. They are discounting to move standing inventory. 

The pipeline behind starts is thinning. Completions fell 14.2% from a year ago to 1.31 million. Units under construction dropped 7.1% to 1.27 million over the same span. Builders are finishing faster than they are breaking ground. 

Permits offer no rebound signal. Total permits fell 0.7% to 1.41 million. Single-family permits edged up 0.6%, with the South and Midwest leading the gains. That is not the leading edge of a recovery yet. 

May's starts captured the rise in mortgage rates that began in March; rates pushed above 6.5% by mid-May, the highest in nine months. In mid-June, the 10-year Treasury yield fell to about 4.4% as hopes of stability in the Middle East eroded the inflation premium. If that holds, mortgage rates should ease off their highs and take some pressure off affordability challenges.