New single-family home construction surged 18.5% in May as overall housing starts, which include multifamily dwellings, jumped 21.7%, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development said in a press release.   

Specifically, single-family homes were built at a seasonally adjusted annual rate of 997,000, compared to an upwardly revised 841,000 rate in April. The May rate was down 6.6% from the 1,067,000 pace of May 2022. Multifamily residences, meanwhile, went up at an annual rate of 624,000, compared to 487,000 in April, representing a 28.1% gain. Year over year, the May rate was up 39.6% from 447,000 in May 2022.  

Total housing starts were 1,631,000, compared to 1,340,000 in April. This pace was 5.7% faster than the 1,543,000 rate clocked in May 2022.   

The increase in new-home construction follows six months in a row of improving builder sentiment, which rose above 50 in June for the first time since July 2022, meaning builders believe overall conditions are “good,” First American Economist Ksenia Potapov said. 

“Builders have good reason for a positive outlook,” Potapov said. “There is plenty of demand on the sidelines, and prospective buyers are increasingly turning to homebuilders. As a result, new homes, which have historically made up approximately 11% of total inventory, now make up nearly 30%.” 

Single-family permits, a leading indicator of future new-home supply, rose 4.8% month over month and fell 13.2% year over year to 897,000 units, while single-family completions rose 3.9% month over month and fell 3.3% year over year to an annual rate of 1,009,000.            

“Builders don’t even need to break ground on new homes to deliver more supply,” Potapov said. “In May, there were 164,000 more single-family homes under construction than in February 2020 – a 31% increase. As builders chip away at the backlog of homes under construction, single-family completions should continue to trend higher.”