H
ousing starts and permits declined in May due to economic and market factors, while buyers remain cautious despite lower mortgage rates. Key points include:

    Single-family home starts dropped 7.3% from the previous year, with issued permits falling 6.4%. Builders face challenges such as higher material costs, slowing demand, tariff uncertainty, and competition from the resale market.

    Mortgage rates have eased, improving affordability in more balanced markets, but mortgage purchase applications continue to decline. Typically a busy season for builders, summer construction numbers suggest a slower pace this year.

    The U.S. Census Bureau reported that housing starts slowed significantly in May, with single-family home starts down 7.3% from the previous year and permits down 6.4%. Completions were up slightly at 0.1%.

    Builders face multiple headwinds, including higher financing costs, tariff uncertainty, softer demand due to elevated rates, increased competition from rising existing-home inventory in key markets, and higher inventories of their own.

    Builder confidence fell to its third-lowest level in 13 years, according to the National Association of Home Builders' June survey. The report noted that 37% of builders were cutting prices this month, the highest share since tracking began in 2022.

    Mortgage rates have continued to decline ahead of the Federal Reserve's meeting, with the 30-year fixed-rate averaging 6.81%. This slow-and-steady decline may improve affordability and set the stage for a busier summer market, but its impact is not uniform across the country.

    Overall mortgage applications were down 2.6% this week, with purchase applications falling 5% compared to the previous week. Despite lower average mortgage rates, economic uncertainty continues to weigh on potential homebuyers' purchase decisions.