By Shaina Mishkin

Roughly four years into a housing slump, bad news keeps showing up in the data. Investors should place more importancethe direction of the 10-year Treasury yield.

The Census Bureau's measure of housing starts -- units that have started construction -- dropped to a seasonally adjusted annual rate of about 1.18 million in May. That is down 15.4% from the month prior, and the slowest annual rate since in May 2020 -- a period right after the pandemic ground home building to a halt.

That sounds pretty bad. Yet builder stocks were jumping in Tuesday trading, with the iShares U.S. Home Construction exchange-traded fund, which tracks the industry, on pace for its highest close since late April. Shares of two large builders, PulteGroup and D.R. Horton, were up 1.3% and 0.9%, respectively, according to Dow Jones Market Data.

The simple explanation: more gloomy housing market data can't beat hopes that an easing of geopolitical tensions will improve mortgage rates and home demand.

The May starts number is just the latest data point in a parade of stats documenting the side effects of the rapid rise in home prices, the fast jump in mortgage rates, and economic and geopolitical uncertainty.

These days, news that the housing market continues to be in a funk barely elicits an eyebrow raise from traders. The weakness has, after all, been the status quo since rates started to rise rapidly in mid-2022.

"Builder sentiment will remain soft until barriers are eased and conditions improve for home building," Bill Owens, the National Association of Home Builders' chairman, said in a statement with the trade group's release Monday of its builder sentiment index, which showed industry sentiment leaning pessimistic for the 26th straight month.

The May headline number alone overstates the slowdown in single-family construction, the kind of houses most public builders construct. The pace of construction on buildings with five or more units dropped roughly 42% in May from April, while single-family units decreased by a shallower 1.9%. Another metric, single-family home construction permits , rose slightly from the month prior. Multifamily permits, however, sagged 3.5%.

More than any other data point, investors are looking to the 10-year Treasury yield, which charts the course for 30-year fixed mortgage rates. The U.S. war in Iran pushed the yield, and mortgage rates in turn, higher because of expectations that higher energy prices will feed into inflation.

Now it has mellowed on expectations that an agreement between the U.S. and Iran will reopen the Strait of Hormuz. The 10-year Treasury yield was down 0.023 percentage point to 4.445%, its lowest yield since May 11.

At a time when housing market stats reflect the same old slump, investors will keep their eyes glued to the 10-year yield.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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June 16, 2026 11:04 ET (15:04 GMT)

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