Housing starts clocked in at a seasonally adjusted rate of 1,549,000, a 14.4 percent decline from revised April levels, according to the U.S. Census Bureau and Dept. of Housing and Urban Development.
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Housing starts dipped dramatically in May as rising inflation and increasing mortgage rates climbed, according to a data released Thursday by the U.S. Census Bureau and Department of Housing and Urban Development.
Housing starts clocked in at a seasonally adjusted annual rate of 1.549 million homes, a 14.4 percent decline from revised April levels as demand for homes wanes amid rising rates, according to the new data. The data measures how many homes began construction in May.
“Single-family home building is slowing as the impacts of higher interest rates reduce housing affordability,” National Association of Home Builders Chairman Jerry Konter said in a statement. “Moreover, construction costs continue to rise, with residential construction materials up 19 percent from a year ago. As the market weakens due to cyclical factors, the long-term housing deficit will persist and continue to frustrate prospective renters and homebuyers.”
The number of new privately owned homes authorized by building permits was at a seasonally adjusted annual rate of 1.695 million, a 7 percent decrease from April levels, while permits for new single-family homes were at 1.048 million, an annual rate 5.5 percent below the levels seen in April.
Home completions for privately owned homes were at a seasonally adjusted annual rate of 1.465 million, which was 9.1 percent above April’s estimate and 9.3 percent above completions for May 2021, a result of increased construction activity seen in several past quarters. Single family homes were completed at an annual rate of 1.343 million, a 2.8 percent increase from the previous month’s numbers.
Cooling demand combined with inflation-induced rising construction costs is enough to slow the housing market, with homebuilder sentiment down month over month as laborers witness a slowdown in demand.
Although builders may have dialed back the pace at which they’re starting new homes, there are currently 822,000 thousand single-family homes under construction — the highest level since November 2006. Construction delays may explain why there are so many homes being built, Bill McBride wrote in his CalculatedRisk newsletter.