New US Home Construction Plunges to Slowest Pace Since June 2020

New home construction in the US slumped in May to the slowest pace in four years, as higher-for-longer interest rates sap the housing industry’s momentum from earlier this year.

Housing starts decreased 5.5% to a 1.28 million annualized rate last month, according to government data released Thursday. The figure was below all but one estimate in a Bloomberg survey of economists.

Building permits, which point to future construction, fell 3.8% to a 1.39 million annual rate, also the weakest since June 2020. The declines in starts and permits were broad across multifamily and single-family units. Authorized permits for single-family homes dropped for a fourth straight month to the slowest pace in a year.

US housing

The drop in homebuilding suggests residential construction may detract from economic growth after stabilizing earlier this year. Before the report, the Federal Reserve Bank of Atlanta’s GDPNow forecast had pegged the category to barely contribute to gross domestic product in the current quarter.