Kiplinger Housing Outlook: Housing Starts Rebound on a Multifamily Building Spike
High mortgage rates, persistent inflation and affordability constraints continue to weigh on housing demand and builder sentiment.
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Home-price gains continue to lose momentum relative to broader inflation trends. The S&P Cotality Case-Shiller U.S. National Home Price NSA Index posted a 1.1% annual gain in May 2026, up slightly from a 0.9% rise in April. On a month-on-month, seasonally adjusted basis, national home prices actually dipped 0.05%. With May headline inflation reaching 4.2%, U.S. home values fell in real terms for the 12th consecutive month. Midwest and Northeast housing markets continue to outperform, while many Sun Belt and Western metro areas face outright price declines. Chicago reported the strongest annual gains for the third straight month (+6.9% year-over-year), followed by New York (+4.2%) and Cleveland (+3.1%). At the other end of the market, Las Vegas saw the steepest price drop (-1.9% year-over- year), followed by Seattle (-1.8%), Denver (-1.8%), and Tampa (-1.6%).
Building conditions remain choppy despite a big construction rebound in June. Total housing starts jumped 19% in June to an annualized rate of 1.427 million units, recovering from May’s revised 15.2% drop (to 1.199 million units). However, the monthly move was driven almost entirely by a volatile 76.3% spike in multifamily construction, while single-family starts slipped 0.2% to 895,000 units. Regional starts increased across all areas, led by the Midwest (+33.3%) and the West (+22.1%), followed by the South (+15.2%) and the Northeast (+10.3%). Nevertheless, builder confidence fell in July. Builders continue to deal with elevated labor and material costs — with overall residential input prices up 6.2% year-over- year and construction materials up 6.9% — alongside labor shortages, as skilled trade workers are pulled into AI infrastructure builds. To clear completed inventory, 63% of builders are offering sales incentives and 37% are cutting prices, continuing to compress profit margins. Meanwhile, building permits, a forward-looking indicator of home building activity, fell 3.0% to an annualized rate of 1.367 million units, signaling weaker activity ahead.
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New-home sales managed a modest uptick in June, though overall demand remains constrained. Sales of new single-family homes rose 1.6% in June to 628,000 annualized units, following an upwardly revised 4.3% decline in May (to 618,000 units). On an annual basis, sales remain down 5.6%. Regional performance varied widely: Sales rose in the South (+9.9%), Northeast (+3.6%) and Midwest (+2.5%), but plummeted in the West (-22.4%). The supply of unsold new homes edged down slightly to 9.3 months. The median price of a new home fell to $398,300 (down from May's revised $412,000), reflecting builder rate buydowns and discounts used to bridge the affordability gap. With 30-year fixed mortgage rates averaging near 6.5% in June, high financing costs continue to keep first-time and trade-up buyers on the sidelines.
Existing-home sales slipped in June following recent gains. Sales of previously owned homes fell 2.4% to an annualized rate of 4.09 million units, pulling back from May’s upwardly revised pace of 4.19 million. Single-family sales fell 2.4% to 3.73 million seasonally adjusted annual units, while condo and multifamily sales fell 2.7%, to 0.36 million. Regional sales declined across the Midwest, South and West, while remaining flat in the Northeast. Total existing inventory fell 0.6% to 1.56 million units (up 1.3% year-over-year), or 4.6 months of supply at the current sales pace. With Treasury yields and inflation expectations keeping upward pressure on borrowing costs, existing-home sales are expected to stay subdued relative to pre-pandemic trends through the summer.
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