By Manuel Gutierrez, Consulting Economist to NKBA

Annual units drop to 1.55 million as builders grow more cautious.

• Current pace is lowest since year-ago April when starts were at 1.51 million annualized.
• Housing starts declined for both single-family and multifamily homes, with the latter dropping a sharp 24 percent. However, the current annual pace of just under 500,000 multi-family units isn’t far below the twelve- month average.
• Single family starts dropped by 9 percent to a 1.05 million annual pace. Unlike multifamily, construction of single-family houses has been gradually falling since last November when it hit a 15-year high of 1.22 million units.
• The two largest regions registered the biggest drops, with the South falling by 21 percent and the West by 18 percent. Together, those regions account for more than 3 in 4 new starts.
• Starts will likely drop further based on the continued rise of mortgage rates, which reached 5.78 percent last week for a 30-year loan. Rates have increased by 2.8 percentage points since the end of last year.
• Despite the falloff in starts, the 1.67 million houses currently under construction remain the highest ever. This reflects the extended time it has been taking to complete homes because of continuing material and labor shortages.

“Single-family home starts dropped by 9 percent in May, continuing the gradual decline that began last November.”