New residential construction activity in the United States fell to its slowest level in six years in May, according to federal data released Tuesday. Housing starts declined 15.4 percent from the previous month, reaching an annualized rate of 1.18 million units, a figure that fell short of economist expectations.

The decrease was largely driven by a 40.2 percent drop in multifamily housing starts, such as apartment buildings. Single-family home construction also decreased, though more modestly, by 1.9 percent to an annualized rate of 882,000 units.

Industry analysts attribute the downturn to ongoing caution among contractors as they work through existing inventories amid weak demand. Builders have responded by lowering prices and offering mortgage rate subsidies to attract buyers. Additionally, many have slowed or paused production of speculative homes—properties built without a buyer already committed.

Some economists caution that the sharp decline, especially in multifamily projects, may reflect normal monthly volatility rather than a structural downturn. Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics, described the drop as “unalarming," noting that monthly housing start figures can be particularly erratic. However, he acknowledged the longer-term outlook for residential construction remains subdued.

Supporting the notion of a cooling market, total building permits, which serve as an indicator of future construction activity, slipped 0.7 percent in May to a seasonally adjusted annual rate of 1.41 million. Within that total, permits for single-family homes recorded a slight increase.

The report underscores ongoing challenges in the housing sector as builders attempt to balance supply with softer buyer demand amid elevated mortgage rates and broader economic uncertainties.