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Housing starts dropped off in May as builders pulled back from new projects, according to new U.S. Census Bureau data released Thursday morning.
Construction starts on new housing units dropped 5.5 percent between April and May to a seasonally adjusted annual rate of 1,277,000 — 19.3 percent lower than levels in May 2023, according to the data.
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“With more homes being completed and no clear line of sight into the path of interest rates, builder confidence fell and many of them scaled back on starting new projects,” Zillow Senior Economist Orphe Divounguy said in a statement.
The slowdown in new building projects came during a point in the year when builders usually ramp up construction, which Divounguy attributed to caution from builders surrounding increased interest rates and the effect they have on housing demand.
“The slowdown in single-family housing starts could reflect a cautious outlook from builders largely due to higher-for-longer interest rates translating to easing housing demand during a time of year when acceleration is typically expected,” he said.
Housing units authorized by building permits in May were at at a seasonally adjusted annual rate of 1,386,000 according to census data, 3.8 percent below their April levels and 9.5 percent lower than the permits recorded in May 2023.
Housing completions fell 8.4 percent between April and May to a seasonally adjusted annual rate of 1,514,000, or 1 percent higher than the May 2023 rate.
“Builders continue to add to the inventory count. In May, single-family home completions were still roughly 1% higher than a year ago. With more homes coming on the market and no equally large uptick in housing sales, total for-sale housing inventory is higher than it was a year ago.
