The housing industry saw a sharp drop in construction starts nationwide in May, both compared with the previous month and with the same period a year earlier. The broader Midwest region showed resilience, but Missouri builders still reported weaker business activity during this time.
According to the U.S. Census Bureau, privately owned housing starts across the country fell 15.4% in May compared to April and 8.7% compared to May 2025. The collapse was driven largely by multifamily construction, which dropped 41.6% in a single month and 12.3% year-over-year, while single-family construction declined slightly, by 1.9%.
The Midwest appeared as the lone regional outlier, as housing starts rose 3.7% from April and 5.9% from a year ago. But, building permits in the Midwest fell 18.1% month-over-month, compared to a 0.7% national decline.
Missouri also has a mixed picture in terms of housing permits in metro areas. According to the Census Bureau, permits in the Kansas City metropolitan statistical area rose 5.7% from April and 66.7% from May 2025. St. Louis permits fell 10.8% from April but rose 14.1% year-over-year. In Columbia, there were 101 permits in May, up 2% from April but down 17.9% from a year ago.
The ground picture, however, doesn’t tell a clean growth story for the housing industry. Builders mostly reported significant declines in their business in recent months, compared to previous years.
What builders are saying
Jeff Hemme is the owner of Hemme Homes and Remodeling, which is based in Columbia and serves the mid-Missouri region. He said the company had a flying start to the year, but business has dropped off sharply in the subsequent months. When the mortgage rate briefly went below 6% earlier this year, his company sold 15 homes in just four weeks. Then mortgage rates climbed back up, and his business slowed down.
“If we don’t think buyers are out there, we’re not going to build,” Hemme said.
He said his company now builds about 25 homes a year in mid-Missouri, down from 50 to 60 just a few years ago. Hemme said this confidence crisis, as much as any cost pressures, shaped the conditions the housing construction industry found itself in this spring.
Shawn Woods, CEO of Ashlar Homes in Blue Springs, also had a similar experience.
“January and February, we started off the year incredibly well, so sales were way ahead of where they were in the previous year,” he said. “And then March, April, and May have kind of been lackluster.”
He estimated his company sold 20% to 25% fewer homes over the three months compared to the same period in 2025.
Parker Girard is a co-owner of Girard Homes, which has been constructing homes in Columbia and mid-Missouri for around 12 years. He also said his business was under strain. He said Columbia has strong underlying demand for housing, but high costs and interest rates make new homes hard to sell at the prices most buyers can afford.
Not every builder experienced similar market swings. Chris DeGuentz is the president of the Home Builders Association of St. Louis and Eastern Missouri and the vice president of Fischer and Frichtel Homes. He said his company saw a flying start this year.
“Relative to this time last year, we have seen an increase of 15% to 20% across all price points we offer due to the type and locations of projects we offer,” he said.
He, however, said many of these business trends may be company-specific.
“There are certain builders that maybe echo the Midwestern trend, and perhaps their growth is only 1% or 2%, which is on par with national data with some cases being flat growth, which may be tied to scarcity of land or poor locations,” he said.
He said he doesn’t see any builders losing ground as the demand is still present in the region.
Contributing factors
According to data from the Housing Affordability Institute, the median price for new homes in Missouri was $437,500 in Dec. 2025, roughly 73% more than the median existing home price at $253,000.
Nick Erickson, the executive director of the institute, said a new home purchase would have consumed 46.5% of Missouri’s median household income in mortgage payments at the end of last year, compared with less than 30% for an existing home. Housing that costs below 30% of income is considered affordable under standard mortgage lending guidelines.
A major reason behind the high cost is new building codes. Jeff Hemme said updated building requirements are adding more expense to each home.
“They are making us do so many things with energy, and making the houses so energy efficient, that they are adding tens of thousands of dollars to an average house every time they change the codes,” Hemme said.
Erickson pointed to Kansas City as a recent case study. The city adopted one of the most aggressive energy codes in the country, and “production in Kansas City ground to a halt for a few months because of this,” he said.
The energy conservation code, which was adopted by the city in 2023, required new homes to be more tightly sealed, better insulated and subject to additional inspections. In February 2026, the city rolled back portions of the code, easing some of the requirements.
Woods mentioned some other factors that are raising costs – stream setback ordinances, wetlands permitting and rising municipal fees.
“Municipalities continue to adopt more and more stringent codes that continue to increase pricing, most of which are not life safety codes but more things that should be left to consumer choice,” Woods said.
Alongside rising costs, Girard pointed to competition from existing homes.
“A lot of times you can go and buy a bigger home with more square footage, that’s an older home that was already built, for less money, than you can build a newer home with smaller square footage, at a higher price point,” he said.
What lies ahead
The season that, as builders say, was supposed to be the strongest one has ended in the red for many. Woods said the market may stay slow for another one or two months before stabilizing.
“For any large uptick or large increase, I think we’re going to have to wait till spring of next year, and see what the interest rates hold,” he said.
Erickson said that an uptick in homebuilding activity will depend greatly on whether government officials enact certain changes.
“Until we see real changes in housing policy at the state, local and federal level, we’re not really going to see much movement,” he said. “We do need to be building more housing, but until we see regulatory relief or a change in rates, there’s not going to be much change in housing production.”
DeGuentz downplayed the national volatility as being very subjective and tied to multifamily starts.
“Starts and permits always fluctuate and you can point to a lot of different things that may affect one builder over another, but overall as single-family home builders we recognize that there’s ups and downs,” he said. “However, builder and new homebuyer sentiment and demand in our region remains above national data.”
This story was originally published by Missouri Business Alert, a fellow member of the KC Media Collective.
