US housing starts fell in May to their lowest point since the COVID-19 pandemic, fresh government data show, signaling a deepening chill in the nation's homebuilding sector. The seasonally adjusted annual rate dropped sharply, sliding below levels not seen since the early months of the 2020 health crisis.
The May numbers
The Commerce Department reported that housing starts—a measure of new residential construction projects that have broken ground—sank to a pace that matches the darkest days of the pandemic. Builders pulled back on new single-family homes and apartments alike, though the steepest decline came in the multifamily segment. Analysts had expected a modest slowdown, but the actual figure undershot even the most bearish forecasts.
Permits for future construction also slipped, suggesting that the weakness may persist. The data covers all types of housing: single-family homes, townhouses, and apartment buildings of five units or more.
What's behind the drop
While the report does not break out specific causes, the housing industry has been grappling with a mix of headwinds. Mortgage rates have climbed well above 7% for a 30-year fixed loan, pushing monthly payments out of reach for many would-be buyers. Builders, in turn, have grown cautious about starting new projects when demand is uncertain.
Higher material costs and a tight labor supply have also squeezed margins. Some developers have shifted toward smaller, cheaper floor plans or offered rate buydowns to entice buyers, but those strategies appear insufficient to reverse the broader trend.
Comparing to pandemic lows
During the early months of the pandemic in April 2020, housing starts briefly collapsed as lockdowns froze construction activity. The May 2025 reading matches that trough, adjusted for seasonal factors. The last time starts were this low outside of a national emergency was in the aftermath of the 2008 financial crisis.
The current slowdown stands out because it is happening during a period of relatively low unemployment and steady job growth. Normally, a strong labor market supports housing demand, but soaring borrowing costs have overwhelmed that support.
What this means for homebuyers and renters
Fewer housing starts means less new supply reaching the market at a time when the nation already faces a chronic shortage of homes, especially affordable ones. That dynamic is likely to keep existing-home prices elevated and put upward pressure on rents. For prospective buyers, the combination of high prices and high rates makes homeownership more elusive.
Builders are expected to keep a cautious stance until mortgage rates show a sustained decline or until the Federal Reserve signals a shift in monetary policy. For now, the May figures offer little hope of relief.
The next reading from the Commerce Department, due in late June, will show whether the slide deepens or stabilizes. Builders will also be watching the Federal Reserve's next interest-rate decision, scheduled for July. Until rates move lower, the construction pipeline appears likely to remain constrained.
