US Housing Market Teeters as Multifamily Construction Plummets, Signaling Economic Headwinds

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Ilustrasi: US Housing Market Teeters as Multifamily Construction Plummets, Signaling Economic Headwinds

Electrical.Kelasteknisi.com — A sharp and sudden downturn in the construction of multifamily dwellings sent shockwaves through the U.S. housing market in May, dragging overall housing production to its lowest level since the early days of the pandemic. The steep decline, coupled with stubbornly high interest rates and soaring construction costs, paints a sobering picture of a critical economic sector grappling with significant headwinds, according to the latest data from the U.S. Census Bureau.

While single-family home construction saw a marginal uptick, it was nowhere near enough to offset the freefall in the multifamily sector, which includes apartment buildings and condominiums. This dramatic shift has industry experts sounding the alarm about a "disappointing spring market" and forecasting a challenging year ahead for the housing industry, a linchpin of the American economy.

The Numbers Tell a Chilling Tale

The seasonally adjusted annual rate of privately-owned housing starts in May plunged to 1.256 million units, a staggering 9.8% below the revised April figure and 4.6% lower than the same period in 2024. This precipitous drop was overwhelmingly driven by a collapse in the multifamily segment.

Construction starts for buildings with five or more units cratered by a breathtaking 30.5% to a seasonally adjusted annual rate of just 316,000 units. This marks the most significant monthly decline in recent memory and signals a stark reversal from the previously booming apartment construction market.

In stark contrast, the single-family home sector, while not robust, showed a sliver of resilience. Starts in this segment edged up by a mere 0.4% to an annualized rate of 924,000. However, this anemic growth was completely overshadowed by the multifamily sector's woes, leaving a substantial void in the nation's housing production pipeline.

"These figures are a clear indication that the brakes are being firmly applied to a significant portion of the housing market," said Yelena Maleyev, a senior economist at KPMG. "The volatility in the multifamily sector, which had been a source of strength, is now a major drag on the overall industry."

Builder Confidence Hits a New Low

The sentiment among those on the front lines of housing construction has soured dramatically. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) for June 2025 fell to 32, its lowest reading since December 2022. A reading below 50 indicates that more builders view conditions as poor than good.

"Builder confidence has been shaken to its core," Robert Dietz, Chief Economist for the NAHB, told CNN. "Persistently high mortgage rates are sidelining potential buyers, and the rising costs of land, labor, and materials are squeezing profit margins to unsustainable levels. This is not the rebound we were hoping for in 2025."

The HMI report revealed a particularly concerning trend: a growing number of builders are being forced to cut prices to attract buyers. In June, 37% of builders reported cutting home prices, a significant jump from 29% in April.

A Confluence of Crushing Costs

The challenges for builders are multifaceted. The cost of borrowing for construction projects remains elevated due to the Federal Reserve's sustained battle against inflation. While mortgage rates have a direct impact on homebuyers, the interest rates for construction loans directly affect the feasibility of new projects for builders.

Simultaneously, the cost of construction materials continues its upward trajectory. The Producer Price Index (PPI) for construction inputs has shown persistent increases, with notable spikes in the prices of steel, lumber, and electrical components through the first half of 2025.

"We're being hit from all sides," said a representative for a major home building firm who spoke on the condition of anonymity. "Financing is more expensive, materials cost more, and finding skilled labor is a constant struggle. At some point, the numbers just don't work, and that's what you're seeing in the multifamily data."

Regional Disparities and a Look Ahead

The slowdown in housing production is not uniform across the country. The Northeast and Midwest saw the most significant drops in housing starts in May, while some regions in the West experienced modest growth. This regional variation underscores the localized nature of housing markets, with some areas facing more acute affordability and supply challenges than others.

Looking ahead, economists are revising their forecasts for the remainder of 2025. The initial optimism for a second-half recovery in housing has been tempered by the latest data. The NAHB is now forecasting a decline in single-family housing starts for the full year.

The sharp decline in multifamily construction is particularly worrisome as it directly impacts the rental market. With fewer new apartments being built, rental affordability could become an even more significant challenge for millions of Americans who are already rent-burdened.

"The ripple effects of this slowdown will be felt across the economy," said Danielle Hale, Chief Economist at Realtor.com. "Housing is a major contributor to GDP, and a sustained downturn in construction will have broader implications for economic growth and employment."

As the summer months unfold, all eyes will be on the Federal Reserve and whether any potential shifts in monetary policy could provide some relief to the beleaguered housing sector. However, for now, the industry remains in a precarious position, caught between the rock of high costs and the hard place of waning demand.