New multifamily starts fell dramatically last month, declining 40.2% from April, according to federal data released Tuesday.
New construction of apartment buildings and condos hit an annualized pace of 295,000, down 14.2% from May 2025. Overall housing starts, which also include single-family residential construction, hit a six-year low at an annualized rate of less than 1.2 million, significantly below economists’ expectations.
Economists had projected overall housing starts to dip by 2.4% to an annual rate of 1.43 million, according to DPA International. Instead, they decreased 15.4% in May.
The Midwest was the only region where overall starts increased in May, up 3.7%. The South and the West saw new construction drop by about 17%, and the Northeast declined 26.8%.
Financing challenges in the housing market remain a headwind for new construction, Jing Fu, National Association of Home Builders senior director of forecasting and analysis, said in a news release.
“While the Midwest has shown some resilience, lower permit activity indicates builders remain cautious about future construction amid economic uncertainty and affordability pressures,” Fu said.
Construction costs have ticked up since the start of the year, interest rates remain elevated, and property insurance costs have increased by double-digit rates annually since 2017.
Still, other stakeholders throughout the industry were unmoved by the sluggish activity in May.
Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, told Bloomberg that the decline was “unalarming” given volatility in monthly start data for multifamily. But he told the outlet the longer-term outlook for housing is still weak.
Nancy Vanden Houten, lead U.S. economist at Oxford Economics, told DPA International she expects starts to move sideways until later in the year, when the industry could benefit from rate cuts that spur home sales and starts.
“Just as the pace of housing starts in March and April overstated the strength in housing activity, the plunge in May overstates any weakness,” she said.
