If you’re thinking the housing market feels a little off lately—you’re not imagining it.
A mix of high prices, hesitant buyers, and shaky builder confidence has created the most significant downturn in new home construction the U.S. has seen in five years.
And if you’re selling or shopping for a home, these changes could directly affect you.
Builders Hit the Brakes on New Homes
According to the latest government data, new home construction across the U.S. dropped 4.6% from April to May.
That puts the pace of building at its slowest since the early pandemic days of May 2020.
While construction of single-family homes barely nudged up by 0.4%, it was a much bleaker picture for multi-family units like apartments and condos—starts there plunged by a massive 30.4%.
Economists say this is more than just a blip. Danielle Hale, chief economist at Realtor.com, told DailyMail.com that builders are already slowing down their plans for future developments.
“That could mean fewer new homes available next year,” she warned.
Building Permits and Confidence Are Dropping Fast
Another key signal that things are cooling off? Building permits—basically the first step toward putting up new homes—fell 2% in May.
These numbers suggest that even fewer homes will be built in the near future.
Regionally, things weren’t much better. The West was the only part of the country that saw a meaningful increase in construction, with a 15.1% rise.
But the Northeast was hit hardest with a staggering 40% drop in new building projects.
Oxford Economics’ senior U.S. economist Matthew Martin put it bluntly: “Cracks are showing in the housing market.”
He pointed to a mix of high mortgage rates, negative builder sentiment, and rising construction costs—especially due to tariffs—as key reasons for the slowdown.
Buyer Uncertainty Is Freezing the Market
It’s not just builders hitting pause. Many potential homebuyers are sitting on the sidelines too, spooked by talk of a recession or simply waiting for prices to drop.
The result? Homes—both new and existing—are sitting on the market longer, and some sellers are beginning to panic.
Builders, in particular, have started cutting prices to entice reluctant buyers back in.
Hale added that tariffs on building materials and immigration-related labor shortages are adding more stress to the construction industry.
“It’s a very challenging environment,” she said.
Buyers Take the Driver’s Seat
In a twist that would’ve seemed unthinkable a year ago, the power in the housing market is shifting back to buyers.
According to Redfin, there are about 2 million homes for sale nationwide right now, but only around 1.5 million active buyers—a gap of 500,000 homes.
That’s the largest imbalance ever recorded between buyers and sellers, giving buyers a unique advantage when it comes to negotiating price, terms, and concessions.
The Value of Homes Keeps Climbing—But Sellers Are Struggling
Ironically, even with all this uncertainty, the total value of homes currently on the market has reached a record $698 billion—a more than 20% jump from this time last year.
But that wealth isn’t being realized by many sellers because of one simple problem: not enough buyers.
Redfin chief economist Daryl Fairweather explained it clearly: “There are nearly half a million more home sellers than buyers right now, which means prices will have to come down.”
In other words, sellers can either wait it out or “bite the bullet,” as Fairweather put it, and start adjusting their asking prices to meet the new reality of the market.
Bottom Line: The Market Is in Flux, and No One’s Immune
Whether you’re buying, selling, or just watching from the sidelines, the U.S. housing market is going through a transformation.
Builders are slowing down. Prices are softening. And for the first time in a while, buyers are calling more of the shots.
But with tariffs, labor shortages, and interest rate uncertainty all in the mix, it’s anyone’s guess how long this new dynamic will last.
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