Big drop in housing starts for May doesn't translate into something bigger...yet

As US interest rates seem more likely to be headed up than down, and home prices remain high to outright unaffordable for many Americans, let's take a look at the recent release of home building activity from US Census Bureau.

Building Permits
Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,413,000. This is 0.7 percent below the revised April rate of 1,423,000 and is 0.2 percent below the May 2025 rate of 1,416,000. Single-family authorizations in May were at a rate of 886,000; this is 0.6 percent above the revised April figure of 881,000. Authorizations of units in buildings with five units or more were at a rate of 474,000 in May.

Housing Starts
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,177,000. This is 15.4 percent (±9.8 percent) below the revised April estimate of 1,392,000 and is 8.7 percent (±8.2 percent) below the May 2025 rate of 1,289,000. Single-family housing starts in May were at a rate of 882,000; this is 1.9 percent (±10.8 percent)* below the revised April figure of 899,000. The May rate for units in buildings with five units or more was 284,000.

Housing starts down more than 15% in May??? That seems like something to worry about. Among non-COVID months, it's the lowest annualized, seasonally adjusted rate of housing starts in more than 7 years.

But as you will see, one month does not a trend make, and it comes on the heels of March having the highest (seasonally adjusted) level of housing starts in more than 2 years.

So that may mean housing starts got pushed forward due to a warmer winter, and this "decline" may just be a leveling out. Permits for home construction indicate have been less volatile over the last year, although I will note a large increase in February - before war expanded in the Middle East, leading to higher inflation and higher mortgage rates.

And those 4 years of reversion to a post-COVID "normal" in permits also shows in the number of homes being completed drifting back down to 2023 levels.

These numbers aren't conducive to increased hiring in the construction sector for the future. That would be a change from what we've been seeing since October, where jobs have resumed a trend of impressive post-COVID gains after declining for much of 2025.

Now, there are other forms of construction beyond homebuilding, and we will have to wait another 10 days to see what the rest of the sector might have done in activity as the construfction season peaks. There isn't any indication of a major slowdown yet, even as costs and interest rates go on the rise, and it'll take more than 1 seasonally adjusted drop in housing starts before we can say we are going on a slide.