New Housing Starts Fell to a Two-Year Low in May
New-home construction fell 14.4% in May, and experts warn that a larger slowdown could be underway in the residential construction sector as builders respond to decreased demand from homebuyers in a period of elevated interest rates. The construction pace for single-family homes dipped 9.2% in May, while the pace of permits for new homes fell nationwide with the biggest decline in the Northeast, which saw a 20.2% reduction in single-family homes, Realtor.com reports.
Economists polled by the Wall Street Journal had initially expected housing starts to drop to a 1.68 million rate in May from April’s initial estimate of 1.72 million, but the annual rate of total housing starts fell even lower to 1.55 million.
The trend in single family starts is downward, said Richard Moody, chief economist at Regions Financial, as higher mortgage interest rates will likely slow demand.
And expect this trend to persist through the year, Oxford Economics’ Nancy Vanden Houten said.
“We expect housing starts to lose some momentum as 2022 progresses, as a sharp rise in mortgage rates sidelines some buyers and as builders have become more cautious,” she wrote in a note on Thursday. “We think a shortage of supply and a record backlog of starts will keep activity from plummeting, but the May data indicate the risk to our forecast is to the downside.”