U.S. Housing Starts and Permits (May 2025)

Homebuilding activity pulls back sharply in May

• Housing starts fell 9.8% month-on-month (m/m) in May to 1.26 million (annualized) units, coming in well below market expectations. Revisions to data for the two prior months added 47k units to the previously reported tallies.
• The May decline in housing starts was driven by the multifamily segment, where starts fell 29.7% m/m (or 140k units). The single-family segment recorded a modest increase of 0.4% (or 4k units).
• Residential permits retreated for the second consecutive month, falling 2.0% m/m to 1.39 million annualized units. Permitting activity fell in both the single-family (-2.7% m/m) and multi-family (-0.8% m/m) segments.
• Among the four Census regions, starts fell sharply in the Northeast (-40% m/m), followed by smaller declines of a little over 10% apiece in the Midwest and South. The West was the only Census region to record an improvement, with starts there rising 15.1% m/m.

Key Implications

• Homebuilding activity fell in May as starts in the single-family segment remained soft, while the support from the multifamily sector retreated, with activity in this smaller (and typically more volatile) segment pulling back sharply for the first time in four months. The decline in the headline measure is not entirely surprising as it comes alongside a tough backdrop for homebuyers and souring sentiment among homebuilders. 
• A confluence of factors is likely to keep homebuilding subdued over the next several months – a theme corroborated by falling permitting activity and weak homebuilder confidence, which fell near pandemic lows in June. Chief among these factors are elevated mortgage rates, which continue to hover near 7%. Uncertainty about the economic outlook due to trade skirmishes (and more recently, a challenging geopolitical environment) are also thought to be contributing to homebuyer hesitancy. While these headwinds will eventually fade, this will take time, with a sustained recovery in homebuilding likely a 2026 story.  

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