New construction surged by 21.7 percent on an unadjusted basis in May, according to Census Bureau data released Tuesday, sailing past economists’ projections of a small decline. 

Housing starts increased to an annual rate of 1.63 million units last month, up from 1.34 million in April. Both single and multi-family construction experienced monthly increases.

“The single-family housing starts of one million were very rare in the 10 years prior to the pandemic,” Lawrence Yun, chief economist at the National Association of Realtors (NAR), told The Hill in an email. 

“Therefore, the latest figure of one million reflects the builders’ confidence in making a relatively easy sale when inventory is offered to consumers.”

High mortgage rates, fueled by the Federal Reserve’s interest rate hikes, are drastically reducing already limited housing stock as potential sellers are choosing to stay put instead of risking a higher rate on a new purchase. 

But builders are filling the inventory gap in both single and multi-family construction for those who can still afford to buy, even as younger or first-time buyers are pushed toward rentals.

“Existing home listings are hampered by homeowners unwilling to give up their locked-in low mortgage rates, but home builders have no constraints. Essentially, build it and home buyers will show,” Yun said.

The Hill’s Adam Barnes has more here.