Key facts
- New home construction in the U.S. reached a six-year low in May.
- Home prices saw a 0.4% decrease in April compared to March.
- Home sales declined by 0.7% in May and 6.3% year-over-year.
- Single-family housing starts and permits are down 6-7% from the previous year.
- Mortgage interest rates are expected to remain around 6.5%.
New home construction in the U.S. experienced a significant downturn in May, reaching its lowest point since the early stages of the COVID-19 pandemic. This decline is expected to further intensify the challenges faced by prospective homebuyers in an already difficult market.
Data released in June indicated that home prices in the U.S. fell by 0.4% in April compared to the previous month, according to S&P CoreLogic Case-Shiller and the Federal Housing Finance Agency. Home sales also saw a decrease, dropping 0.7% in May and 6.3% year-over-year, as reported by the United States Census Bureau. Homebuilders are responding to these sluggish market conditions by scaling back new construction. Both single-family starts and permits have decreased by approximately 6-7% from last year, with multifamily construction also experiencing a slowdown.
Interest rates for mortgages are anticipated to remain relatively stable, hovering around 6.5% for the remainder of 2025. Moody's Ratings analysis suggests these trends point to weaker growth in U.S. housing supply. Builder sentiment has also taken a hit, with a recent survey showing confidence levels at their lowest since November 2023.
Affordability remains a major constraint, with the median existing home sales price reaching an all-time high of $414,000 in April. Home sales activity is currently at 75% of pre-pandemic levels, despite job growth. Permits for buildings with five or more units are down over 5% year-to-date, potentially impacting future supply. Additionally, tariffs on Canadian lumber have contributed to a roughly 16% increase in framing lumber costs over the past year, adding to construction expenses.