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Single-family and multifamily housing starts fell in May as high interest rates for construction and development loans and mortgage rates held back both housing supply and demand.

Overall housing starts fell 5.5% in May to a seasonally adjusted annual rate of 1.28 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The May reading of 1.28 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 5.2% to a 982,00 seasonally adjusted annual rate.

However, on a year-to-date basis, single-family starts are up 18.8%, albeit off weak early 2023 data. The multifamily sector, which includes apartment buildings and condos, declined 6.6% to an annualized 295,000 pace. This is the lowest pace for apartment construction since April 2020.

“Overall lower housing production correspond with our latest industry surveys, which show builders are concerned with a high interest environment that is making it harder to get acquisition, development and construction loans to increase home building activity,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and custom home builder from Wichita, Kan. “Higher rates for builder and developer loans, along with ongoing supply-side challenges regarding construction labor and buildable lots, are acting as headwinds for new home and apartment construction.”

On the demand side, mortgage rates averaged 7.06% in May per Freddie Mac, the highest reading since November 2023. This high interest rate environment is causing many potential buyers to remain on the sidelines.

“It is not just the single-family market that is experiencing challenges. The three-month moving average for multifamily starts is the lowest since the fall of 2013 as the multifamily development deceleration continues,” said NAHB Chief Economist Robert Dietz.

The ratio of multifamily completions to starts (the total number of apartments completing construction compared to those starting construction) was 1.8 in May, tied with April for the highest ratio since Covid. “This ratio was 0.6 in April 2022 when many more apartments were starting construction compared to finishing construction, demonstrating the significant reversal for the multifamily construction pipeline,” said Dietz.

The number of apartments under construction is now down to 914,000, the lowest count since September 2022 and down 11% since the peak rate in June 2023.

On a regional and year-to-date basis, combined single-family and multifamily starts are 22.2% lower in the Northeast, 8.0% lower in the Midwest, 2.3% lower in the South and 2.6% higher in the West. Declines for multifamily construction are driving the weakness for those regions showing year-to-date total housing starts declines.

Overall permits decreased 3.8% to a 1.39-million-unit annualized rate in May. Single-family permits decreased 2.9% to a 949,000 unit rate; this is the lowest pace since July 2023. Multifamily permits decreased 5.6% to an annualized 437,000 pace.

Looking at regional data on a year-to-date basis, permits are 0.7% higher in the Northeast, 5.3% higher in the Midwest, 0.8% higher in the South and 1.5% lower in the West.

The National Association of Home Builders is a Washington-based trade association representing more than 140,000 members, and is affiliated with 700 state and local home builder associations around the country.

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Pending home sales in May slipped 2.1%, according to the National Association of REALTORS®. The Midwest and South posted monthly losses in transactions while the Northeast and West recorded gains. Year-over-year, all United States regions registered reductions.

The Pending Home Sales Index (PHSI)—a forward-looking indicator of home sales based on contract signings – decreased to 70.8 in May. Year-over-year, pending transactions were down 6.6%. An index of 100 is equal to the level of contract activity in 2001.

“The market is at an interesting point with rising inventory and lower demand,” said NAR Chief Economist Lawrence Yun. “Supply and demand movements suggest easing home price appreciation in upcoming months. Inevitably, more inventory in a job-creating economy will lead to greater home buying, especially when mortgage rates descend.”

U.S. Economic Forecast

NAR predicts mortgage rates will remain above 6% in 2024 and 2025, even with the Federal Reserve cuts to the Fed Funds rate.

The association forecasts that existing-home sales will rise to 4.26 million in 2024 (from 4.09 million 2023) and to 4.92 million in 2025 (from 2024). Housing starts are expected to rise to 1.382 million in 2024 (from 1.413 million in 2023) and to 1.492 million in 2025 (from 2024).

NAR anticipates the median existing-home price will increase to a record annual high of $405,300 in 2024 (from $389,800 in 2023) and to $412,000 in 2025 (from 2024). NAR forecasts increases in the median new home price to $434,100 in 2024 (from $428,600 in 2023) and $441,200 in 2025 (from 2024).

“The first half of the year did not meet expectations regarding home sales but exceeded expectations related to home prices,” explained Yun. “In the second half of 2024, look for moderately lower mortgage rates, higher home sales and stabilizing home prices.”

Pending Home Sales Regional Breakdown

The Northeast PHSI ascended 1.1% from last month to 63.6, a decline of 2.3% from May 2023. The Midwest index dropped 0.4% to 70.4 in May, down 5.6% from one year ago.

The South PHSI lowered 5.5% to 83.7 in May, falling 10.4% from the prior year. The West index increased 1.4% in May to 56.7, down 2.1% from May 2023.

National Association of REALTORS® is America’s largest trade association, representing more than 1.5 million members involved in all aspects of the residential and commercial real estate industries.

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More than three in five (61.9%) homes that were on the market in May had been listed for at least 30 days without going under contract, according to a new report from Redfin (redfin.com), the technology-powered real estate brokerage. That’s up from 60% one year earlier and roughly 50% two years earlier.

The share of homes sitting on the market for at least one month has been increasing year over year since March, when growth in new listings accelerated but demand from buyers remained tepid, as it has been since mortgage rates started rising in 2022. More homes for sale paired with slow demand means that less-desirable listings are piling up, leaving some of them without a buyer.

This is according to an analysis of Redfin’s housing-market data, which goes back through 2012. The inventory data in Redfin’s report includes homes that were on the market for at least 30 days, or at least 60 days, without going under contract and were actively listed on the final day of the month.

Stubbornly high mortgage rates and record-high home prices have priced out many homebuyers, tempering demand even at a time of year when the housing market is typically warming up. The average 30-year fixed mortgage rate is 6.99%, more than double the pandemic-era low and just slightly below October 2023’s two-decade high of 7.8%. The median United States monthly housing payment is just about $30 shy of its record high.

Redfin agents report that move-in ready homes in desirable neighborhoods that are appropriately priced are still selling quickly, but listings that don’t fit that bill are starting to pile up in some parts of the country.

Two in five listings are sitting on the market for 60 days or more

Two in five (40.1%) homes that were on the market in May had been listed for at least two months without going under contract. That’s unchanged from a year earlier and up from 27.8% two years earlier.

The share of homes sitting on the market for at least 60 days was essentially flat year over year in both April and May. Before that, the metric had posted annual declines since last September. The share of homes sitting for at least 60 days is likely to start increasing next month so long as mortgage rates stay high, according to Redfin economists.

Metro-level highlights: Unsold inventory, May 2024

The share of inventory sitting on the market for 30-plus days is growing fastest in Dallas. Just over 60% of Dallas listings that were on the market in May had been listed for at least 30 days, up from 53% a year earlier. Next come three Florida metros: Fort Lauderdale (75.5%, up from 68.2%), Tampa (68.7%, up from 61.9%) and Jacksonville (69.2%, up from 62.9%). Inventory is growing stale fast in Texas and Florida largely because those states are building far more homes than anywhere else in the country, contributing to rising supply, and because some homebuyers are nervous about the increasing prevalence of natural disasters.

On the other end of the spectrum, the share of homes sitting on the market for at least 30 days has declined most in Seattle (41.2%, down from 50.5%), Las Vegas (55.9%, down from 63.9%) and San Jose, CA (34.4%, down from 42.2%).

View the full report, including charts and additional metro-level data, here.

Redfin Corporation, based in Seattle, provides residential real estate brokerage and mortgage origination services. The company operates in more than 100 markets in the United States and Canada.

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Single-family starts remained flat in April as interest rates moved above 7% last month and builders were dealing with tighter lending conditions.

Overall housing starts increased 5.7% in April to a seasonally adjusted annual rate of 1.36 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The April reading of 1.36 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 0.4% to a 1.03 million seasonally adjusted annual rate. However, this pace is 17.7% higher than a year ago. On a year-to-date basis, single-family starts are up 25.7%, totaling 335,600. The multifamily sector, which includes apartment buildings and condos, increased 30.6% to an annualized 329,000 pace.

“While the start of the year has seen an expansion for single-family home building because of a lack of existing home inventory, home building activity leveled off in April as higher interest rates, tighter lending conditions and lower home building sentiment acted as headwinds on new home construction,” said Carl Harris, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Wichita, Kan. “Lower interest rates, particularly for builder and developer loans, will help builders to increase the pace of home construction in the months ahead.”

“Moving forward, the multifamily market will see additional declines for construction volume, while the pace of completions remains elevated,” said NAHB Chief Economist Robert Dietz. “April marked the fifth consecutive month for which the seasonally adjusted rate of multifamily completions was above 500,000. This additional rental supply will help lower shelter inflation, which is the last leg of the inflation policy challenge.”

On a regional and year-to-date basis, combined single-family and multifamily starts are 24.5% lower in the Northeast, 11.0% higher in the Midwest, 1.8% higher in the South and 8.4% higher in the West.

Overall permits decreased 3.0% to a 1.44 million unit annualized rate in April. Single-family permits decreased 0.8% to a 976,000 unit rate; this is the lowest pace since August 2023. Multifamily permits decreased 7.4% to an annualized 464,000 pace.

Looking at regional data on a year-to-date basis, permits are 9.3% higher in the Northeast, 8.5% higher in the Midwest, 2.8% higher in the South and 0.2% higher in the West.

After peaking in July 2023 at 1.02 million apartments under construction, active multifamily units under construction is declining quickly—down to 934,000 in April.

The National Association of Home Builders is a Washington-based trade association representing more than 140,000 members, and is affiliated with 700 state and local home builder associations around the country.

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There’s an old saying that you can never go home again, yet nearly half of all adults would do just that if they could. A new Zillow® survey finds that 44% of Americans would buy their childhood home if cost were not an issue, yet only half of all adults say they could afford it at today’s prices. An even larger share of millennials and Gen Z adults would buy their childhood home today. It suggests that the nostalgia craze that has swept pop culture, social media, fashion and marketing has reached housing.

“It appears younger generations aren’t just nostalgic for low-rise jeans and Barbie, but for a simpler time in their lives when home was a place of comfort and safety,” said Manny Garcia, a senior population scientist at Zillow who conducted this research. “They may associate positive memories with their childhood home, having lived there without the burdens of rent, mortgage payments, maintenance, insurance or other housing hurdles. Today, a comparable home can feel out of reach, especially for younger adults who aspire to buy, but face steep affordability challenges.”

Children of the 1980s and 1990s are the most likely to say they would buy their childhood home today—62% and 55% respectively. Yet almost half of those born in the ’80s (47%) and nearly two-thirds of those born in the ’90s (62%) say they couldn’t afford it at today’s prices.

Those would-be buyers now need to earn a six-figure income to afford the typical U.S. home. Younger generations may long for the housing market of their youth when prices were lower, but their parents likely faced similar, if not worse, affordability challenges in the early 1980s. In 1981, mortgage rates soared above 18%, taking the typical monthly mortgage payment amount up to 55% of a median income at the time. Today, a new mover’s mortgage burden represents nearly 40% of a typical income—still well beyond the 30% threshold considered affordable.

Buyers today have easier access to affordability resources. Home shoppers can see down payment assistance programs they may be eligible for on for-sale listings on Zillow. They can tap into online affordability tools to better understand how much they can comfortably spend on a home, and then shop for homes by monthly payment, instead of by purchase price.

While many adults aspire to buy their childhood home today, they likely envisioned a very different dream home in childhood. The largest shares of adults say that, as a child, their dream home included a pool (77%) and/or a home theater (73%). Today, 72% of adults would still include a pool, and 76% would include a home theater in their current dream home, suggesting some dreams never die.

When reality sets in, practical features prevail. A vast majority of adults now dream of a home with air conditioning (89%), a walk-in closet (89%) and a laundry room (85%). However, that inner child lives within a significant share of adults, who still want a bowling alley (43%), a frozen yogurt or soft serve machine (34%), and a soda vending machine (24%) in their present-day dream home.

Not all generations grew up pining for the same dream home features. Elevators reveal the largest generational divide: 58% of those born in the ’90s say their childhood selves dreamed of having a lift in their home versus only 21% of those born in the ’50s and earlier. There is an almost equally large 35-point gap for Jacuzzis and hot tubs. Conversely, 38% of children of the ’50s and earlier dreamed of a home with a white picket fence in their childhood, while only 21% of those born in the ’90s say the same.

Zillow Group, Inc. is reimagining real estate to make home a reality for more and more people. As the most visited real estate website in the United States, Zillow and its affiliates help people find and get the home they want by connecting them with digital solutions, great partners, and easier buying, selling, financing and renting experiences.

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