Soft Patch Persists: Demand Strains, Supply Tightens, Margins Compressed

Research evidence excerpt

Soft Patch Persists: Demand Strains, Supply Tightens, Margins Compressed

Accessible version

HY Homebuilders, Building Materials

Soft Patch Persists: Demand Strains,

Supply Tightens, Margins Compressed

Industry Overview

May 2026 Construction Trends 18 June 2026

May 2026 residential construction trends based on The US Census’ Survey of High Yield Credit

Construction dated June 16, 2026, and other sources. United States

Homebuilders, Building Materials,

Starts Flat as SF Weakness Offset MF Recovery Rentals

Total housing starts have declined modestly (-0.9% y/y YTD through May), with Single James Kayler, CFA

Family (SF) down -6.3% while MF rose +15.0%. Starts did improve into 2Q. The SF/MF Research Analyst

BofAS

mix continues to rebalance, with the ratio compressing to ~2.2x, reflecting reduced +1 646 855 9223

reliance on SF as MF normalizes. james.f.kayler@bofa.com

Drew Thompson

Permits and Pipeline Signals Softer Forward Supply ResearchBofAS Analyst

Permits remain weak (-2.5% y/y YTD), driven by SF (-6.6%) despite stabilization in MF +1 646 855 8205

andrew.thompson2@bofa.com

(+8.4%). Construction volumes continue to contract (under construction -7.2% y/y), while

completions fell ~12.5%, highlighting a slowing delivery pipeline and tighter near-term

supply backdrop.

Affordability Worsens as Rates Rise

NAR’s Affordability Index declined to 105.6 in May (vs. 108.0 in April), marking a MF: multifamily

continued erosion in homebuyer purchasing power as rising home prices and higher

mortgage rates offset income gains. The median home price increased +2.9% m/m to

$434K, while mortgage rates rose to 6.52% from 6.41% in April, driving monthly

payments higher (+4.2% m/m) and pushing the payment-to-income ratio up to 23.7%.

Builders Confidence Down, Incentives Up in June