U.S. construction spending declined for the seventh consecutive month in May, as high interest rates and economic uncertainty continued to pressure the housing market. The Commerce Department reported that total construction outlays fell 0.3% from April, bringing spending to an annualized pace of $901.1 billion—the lowest level in 19 months.
Residential construction spending dipped 0.5% month over month and dropped 6.5% from a year earlier, driven by a 1.8% decline in new single-family housing projects. The sustained slowdown in construction activity underscores the persistent challenges builders face, with material costs remaining elevated and demand cooling amid tighter financial conditions. The May data indicate that a meaningful rebound in construction spending is unlikely in the near term.
Construction spending in the United States fell for the seventh month in a row in May, reflecting continued strain in the residential sector. According to the Commerce Department’s monthly report, total outlays reached a seasonally adjusted annual rate of $901.1 billion, marking the lowest level since October 2023.
Residential construction accounted for much of the decline, dropping 0.5% from April and recording a 6.5% decrease compared with May 2024. Spending on new single-family housing led the retreat with a month-over-month reduction of 1.8%, highlighting the impact of high mortgage rates on potential buyers and builders alike. Multifamily construction held steady relative to April but remained down 10.9% year over year.
Single-Family Activity Weakens Further
The report showed that single-family construction, often viewed as a bellwether for broader housing trends, continues to lose momentum. Builders have faced persistent affordability challenges as borrowing costs have stayed elevated. The average 30-year fixed mortgage rate has hovered near 7% this spring, according to data from Freddie Mac, reducing purchasing power for many buyers.
Even as demand softens, supply-side pressures remain acute. Labor shortages and high building material costs have weighed on project timelines and budgets. Lumber and concrete prices remain elevated compared to pre-pandemic norms, while supply chains for electrical components and plumbing fixtures continue to experience delays.
The National Association of Home Builders noted in June that builder confidence declined to its lowest point in nearly a year. That index reflected concerns that both new and prospective homeowners are pausing decisions until borrowing costs ease.
Trade Disputes Cloud Outlook
Beyond interest rates, international trade negotiations are also adding uncertainty. Ongoing tensions between the U.S. and several trading partners have kept tariffs in place for many key materials. The Commerce Department report stated that no significant relief in input costs is expected in the coming months, further constraining the sector.
Analysts expect the construction spending decline to persist through the summer, barring any rapid improvement in financing conditions or material costs. According to the Associated General Contractors of America, the current pace of new project starts has slowed considerably compared with mid-2023.
Community Impact and Longer-Term Concerns
The slowdown in construction affects communities across the country. Reduced building activity limits housing availability and can contribute to higher rents and home prices, especially in areas already facing shortages. In Southern California, many developers are delaying projects due to financing hurdles, which could extend supply constraints well into 2026.
For more detail on the latest data, the full Commerce Department construction spending report is available at U.S. Census Bureau. For a broader perspective on housing market trends, visit Freddie Mac.
