U.S. housing market recovery momentum faces a test as May housing starts plunge to a new low since the pandemic.

```

The U.S. housing market is under pressure again. May’s new home construction data collapsed sharply, reaching the lowest level since the pandemic and falling much more than market expectations.

On Tuesday, data from the U.S. Department of Commerce showed that new home starts in May dropped 15.4% from the previous month, far below the market’s expected 2% decline, marking the largest monthly drop since March 2024. Meanwhile, the April figure was revised downward to an 8.5% month-over-month drop. After seasonal adjustment, the annualized total number of new home starts in May fell to the lowest level since the pandemic, while just a month earlier, this indicator was at a high point for 2024.

With housing inventory remaining high and mortgage rates persistently elevated, residential construction activity has cooled noticeably. May’s building permits declined 0.7% from the previous month, roughly in line with market expectations, but permits for multi-family homes continued to weaken, reflecting developers’ caution about launching new projects.

Multi-family homes drag down overall starts

Structurally, the sharp decline in May's new construction data was mainly dragged down by multi-family homes.

For example, the annualized number of multi-family home starts fell from a revised 486,000 to 284,000 units. In contrast, single-family home starts dropped only slightly from 899,000 to 882,000 units, showing relative stability.

Building permit data also shows a similar split. Single-family home permits rose from a revised 881,000 to 886,000 units, continuing moderate growth; multi-family home permits fell from 491,000 to 474,000 units, indicating developers' reduced willingness to expand the rental housing market.

High interest rates and high inventory limit development willingness

Analysts believe that the housing market is facing both financing costs and inventory pressure.

On the one hand, persistently high mortgage rates continue to suppress home buying demand; on the other, rising housing inventory lengthens sales cycles, causing developers to be more cautious with new investments.

Against this backdrop, residential construction activity has slowed further, raising concerns about whether builders' confidence will weaken. With new construction data declining markedly, the momentum for recovery in the U.S. real estate market still faces a test.

Risk Warning and DisclaimerThe market is risky, so investment should be cautious. This article does not constitute personal investment advice, nor does it take into account the specific investment goals, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their own circumstances. Invest accordingly, at your own risk. ```