Interest Rates & Supply Disruptions Increase Construction Costs – NMP Skip to main content

Interest Rates & Supply Disruptions Increase Construction Costs

Jun 20, 2022
Construction worker
Associate Editor

Rising interest rates and building material supply-chain disruptions act as significant headwinds on the housing market.

KEY TAKEAWAYS
  • Total housing starts in the U.S. fell 14.4% to a seasonally adjusted annual rate of 1.55 million units in May.
  • Construction costs continue to rise, with residential construction materials up 19% from a year ago.
  • Single-family starts decreased 9.2%; the multifamily sector, including apartment buildings and condos, fell 23.7%.
  • However, the acceleration in construction activity in recent quarters has caused housing completions to rise.

Rising interest rates and building material supply-chain disruptions are causing construction costs to rise continually, acting as significant headwinds on the housing market. 

Total housing starts in the U.S. fell 14.4% to a seasonally adjusted annual rate of 1.55 million units in May, according to a report from the U.S. Department of Housing & Urban Development and the U.S. Census Bureau.

The May reading of 1.55 million starts represents the number of housing units builders would begin if development kept this pace for the next 12 months. Broken down by housing type, single-family starts decreased 9.2% to a 1.05 million seasonally adjusted annual rate. The multifamily sector, including apartment buildings and condos, fell 23.7% to an annualized 498,000 pace.

“Single-family home building is slowing as the impacts of higher interest rates reduce housing affordability,” said Jerry Konter, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Savannah, Ga. “Moreover, construction costs continue to rise, with residential construction materials up 19% from a year ago. As the market weakens due to cyclical factors, the long-term housing deficit will persist and continue to frustrate prospective renters and home buyers.”

“In further signs that the housing market is weakening, single-family permits are down 2.5% on a year-to-date basis and home-builder confidence has declined for the last six months,” said NAHB Chief Economist Robert Dietz. “Due to the acceleration in construction activity in recent quarters, housing completions are rising. Single-family completions were up 8.5% in May 2022 compared to May 2021 as inventories rise.”

On a regional and year-to-date basis, single-family and multi-family starts are 2.1% higher in the Northeast, 1.2% higher in the Midwest, 12.9% higher in the South and 4.3% higher in the West. 

Overall permits decreased 7%, though, to a 1.7 million unit annualized rate in May. Single-family permits fell 5.5% to a 1.05 million unit rate, marking the lowest pace for single-family permits since July 2020. Multifamily permits fell 9.4% to an annualized pace of 647,000. 

Looking at regional permit data on a year-to-date basis, permits are 8.3% lower in the Northeast, 5.2% higher in the Midwest, 4.6% higher in the South, and 1.6% higher in the West. 

About the author
Associate Editor
Katie Jensen is a mortgage news reporter at NMP.
Published
Jun 20, 2022
Higher Mortgage Rates Push Pending Home Sales Lower In June

Contract signings fell 5.4% from May as elevated borrowing costs and record home prices continued to pressure affordability, particularly for first-time buyers

Jul 20, 2026
Short Sales Now Recover More Value Than Foreclosures

Realtor.com finds short-sale activity accelerating, though the transactions represented just 0.6% of typical home sales in 2025

Jul 17, 2026
Chrisman: Why Do Mortgage Rates Care About Inflation?

When prices rise, bond values fall — here’s the mechanics behind why inflation drives mortgage rates higher

Jul 15, 2026
AD Mortgage Closes Fifth Non-QM Securitization Of 2026, Betting Big On Geographic Diversification

A $432.4 million deal backed by over 1,000 loans shows investors are still hungry for Non-QM paper — but the real story is where the loans are coming from

Jul 15, 2026
Mortgage Apps Fall As Rates Hit Highest Level Since August 2025

Purchase demand softened while refinance activity continued to show resilience despite higher borrowing costs

Jul 15, 2026
Foreclosure Inquiries Reach Highest Level Since 2020

LegalShield points to rising homeowner distress following the expiration of pandemic-era FHA relief programs

Jul 14, 2026