US Housing Activity Slows
US Housing Starts Plummet to Six-Year Low Amid Rising Mortgage Rates and Record Prices
Key Points
The May slowdown came with detailed segment data: housing starts were at a 1.18 million annualized pace, with multifamily starts at 295,000 units (284,000 in buildings with five units or more) versus single-family starts at 882,000. Permits were 1.41 million annualized, including 886,000 single-family and 527,000 multifamily, while completions fell to 1.31 million (872,000 single-family; 426,000 in five-plus units). Units under construction totaled 1.27 million.
Mortgage-rate pressure linked to the U.S.-backed war with Iran was quantified: the rate on the popular 30-year fixed mortgage “has increased more than 50 basis points since the conflict started in late February,” according to Freddie Mac data cited by the report. The broader backdrop also worsened, with residential investment “contracted for five straight quarters” and a NAHB survey showing builder sentiment deteriorated in June.
For existing homes, Redfin reported the median sale price reached a record $400,894 (first time the typical U.S. existing home sold for over $400,000). Redfin also put the typical monthly payment at $2,619—“just $8 shy” of late May’s 11-month high—and said pending home sales fell 0.6% week over week for the fourth straight week, citing buyer concerns including Middle East hostilities and the possibility of a Fed rate hike. Chen Zhao, Redfin’s head of economics research, said the $400,000 threshold is “a reminder of how difficult it is to break into homeownership for many Americans.”
Dubai’s transaction drop was stark in volume terms even as prices stayed steadier: data analyzed from the Dubai Land Department by REIDIN showed residential sales hit 22.5 billion dirhams in May—down 42% from April and roughly half of the 46.6 billion dirhams recorded in February before the conflict started. The Dubai Land Department said the market “continues to demonstrate strong fundamentals, supported by a diversified investor base.”
U.S. homebuilding slumped to its weakest pace in six years last month, with housing starts falling 15.4% to an annualized rate of 1.18 million units in May, according to Census Bureau. The drop was driven by a 41.6% collapse in multifamily construction, even as single-family starts slipped a more modest 1.9% to 882,000 units.
The slowdown is hitting an already strained market. Mortgage rates have climbed more than 50 basis points since the U.S.-backed conflict with Iran began in late February, according to Freddie Mac data. At the same time, the median existing U.S. home price just crossed $400,000 for the first time ever — a record that underscores how hard it has become for buyers to get in.
Multifamily Construction Leads a Six-Year Housing Collapse
The steepest damage in May came from apartment and condo construction. Starts for buildings with five or more units plunged to just 284,000 annualized units, Multifamily Dive reported. That is a massive pullback from the months prior. Total permits also slipped, coming in at 1.41 million — including 886,000 single-family and 527,000 multifamily. Completions fell 8.1% to 1.31 million units.
Builders are clearly pumping the brakes. Residential investment has now contracted for five straight quarters, dragging on U.S. GDP. The National Association of Home Builders reported its sentiment index fell to 35 in June — the lowest reading since 2012. That marks the 14th straight month below 40, the threshold that separates pessimism from optimism.
Iran Conflict Pushes Mortgage Rates Above the Breaking Point
The trigger behind much of the housing pain is a rapid rise in borrowing costs. Since the U.S.-backed conflict with Iran erupted in late February 2026, the 30-year fixed mortgage rate has jumped more than 50 basis points, according to Freddie Mac data cited by HousingWire. That increase adds thousands of dollars to the lifetime cost of a typical loan.
The conflict closed the Strait of Hormuz — the route for roughly 20% of global oil. That sent energy prices surging, which fed into broader inflation and pushed mortgage rates higher. Tentative diplomacy is now underway. President Trump said over the weekend that "the oil will flow" once a deal with Iran is signed, with a potential agreement expected as soon as June 19.
Home Prices Hit Record $400,000 as Buyers Pull Back
Even as construction slows, prices are not falling. The median U.S. existing home sale price hit $400,894 in early June — the first time a typical home has sold for over $400,000, according to Redfin. The typical monthly payment now sits at $2,619, just $8 below the 11-month high set in late May.
Demand is softening under that weight. Pending home sales dropped 0.6% week over week for the fourth straight week, Redfin said. Chen Zhao, Redfin's head of economics research, called the $400,000 mark "a reminder of how difficult it is to break into homeownership for many Americans." Buyers are also spooked by Middle East tensions and the possibility of a Federal Reserve rate hike.
Dubai Deal Volume Craters 42% After Regional Instability
The housing chill is not limited to the U.S. In Dubai, residential sales values fell to 22.5 billion dirhams in May — down 42% from April and roughly half the 46.6 billion dirhams recorded in February before the conflict began, according to data from the Dubai Land Department analyzed by World Infonasional. Deal volumes dropped sharply, with buyers turning especially cautious on off-plan projects that require large upfront payments.
Prices in Dubai have held steadier than volumes suggest. The Dubai Land Department said the market "continues to demonstrate strong fundamentals, supported by a diversified investor base." Still, 14 new project launches totaling just 2,942 units in May points to developers pulling back too — a sign that even a resilient market is not immune to geopolitical uncertainty.
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