A key indicator of the health of the housing market has plummeted to its lowest level in five years.
Construction of single-family homes — like stand-alone houses — rose just 0.4 percent in May.
Apartment and condo building starts dropped a staggering 30.4 percent.
Overall, new-home building fell 4.6 percent from April to May, hitting the slowest pace since May 2020, during the height of the pandemic.
The sharp slowdown comes as buyers pull back — worried about a possible recession or holding out in hopes that prices will drop.
‘Builders are already adjusting their outlooks, and slowing the development pipeline which could mean that new homes are harder to come by in the next year,’ Realtor.com economist Danielle Hale told DailyMail.com.
Building permits, a sign of future construction, also fell 2 percent to 1.26 million from April to May, according to the government.
New-home construction did grow in the West by 15.1 percent, but fell across the rest of the US.
The pace of new homes that private builders are starting work on has slowed, and buyers have all but gone cold
Chief Realtor.com economist Danielle Hale (pictured) said new homes could be more difficult to come by in the next year
The biggest dip in new-home construction was in the Northeast, which saw a 40 percent drop.
That’s an alarming dip.
‘Cracks are appearing in the housing market as negative homebuilder sentiment, elevated mortgage rates, and higher building costs due to tariffs weigh on activity,’ said Matthew Martin, senior US economist at Oxford Economics.
‘Building permits point to a slower pace of construction, while May retail sales data suggested home improvement spending is slowing.’
He added that housing starts were far weaker than consensus expectations.
‘The decline in permits was concentrated in single-family, signaling a trend rather than seasonal volatility,’ said Martin.
‘A truce between the US and China tariffs has done little to assuage homebuilder sentiment, and continued uncertainty will keep construction depressed this year.’
As the demand for new construction is crashing, the number of existing homes sitting on the market for sale is growing.
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The toxic mix of the slow construction, rising inventory levels and weak buyer demand have also resulted in homes sitting longer on the market.
Some builders are also starting to lower home prices to lure buyers.
‘Builders are operating in a very challenging environment and it showed up in the May construction data,’ said Hale.
Tariffs are also raising the cost of building materials and Donald Trump’s immigration policy is causing labor shortages.
Sellers are panicking as they are being forced to slash prices and offer buyers concessions.
In early June, the overall US housing market underwent a dramatic reversal, landing in favor of buyers.
Buyers now have the upper hand since they have a list of options in many different markets and are in a good place to negotiate a good price.
This month, there are around 2 million homes are for sale across the country, but only about 1.5 million active homebuyers are looking.
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That 500,000 gap marks the largest imbalance ever recorded.
At the same time the total value of homes on the market has hit a record-shattering $698 billion, up more than 20 percent from the same time last year.
But with far fewer buyers in the game, sellers are being forced to slash prices.
‘The balance of power in the US housing market has shifted toward buyers,’ Redfin senior economist Asad Khan told DailyMail.com.
‘But a lot of sellers have yet to see or accept the writing on the wall.’
Meanwhile, the total value of homes on the market is now $698 billion, up 20.3 percent from a year ago, and a new record, according to Redfin.
Too much inventory flooding the market is also slowing demand.
The number of sellers is much higher than buyers, Redfin chief economist Daryl Fairweather told the Daily Mail.
‘Right now there are nearly half a million more home sellers than buyers in the market, which means that prices will have to come down in order to lure enough buyers back into the market to match the number of sellers,’ she said.
‘I think more homeowners are going to have to bite the bullet and lower their prices.’