The number of single-family homes increased in December, but fell by about 7.0% year-over-year through 2025.
According to the National Association of Home Builders (NAHB), new home construction is expected to remain relatively flat this year, but could rebound in 2027 as mortgage rates lower and pent-up demand enters the housing market.
Census data released Wednesday showed the number of single-family homes fell about 7.3% last year, but there were wide regional differences. The number of single-family homes fell by 8.4% in the South and by 10.7% in the West. Housing starts in the Northeast and Midwest, regions with less population growth, remained relatively unchanged.
Nationally, the number of new permits for single-family homes fell by about 10.9%, correction area. The South, which was responsible for 60% of all new permits issued, experienced an annual decline of 15.4%, while permits granted in the South fell by 6.6%. The Midwest saw a smaller decline of 3.2%, and permits allowed in the Northeast remained unchanged.
After overly aggressively ramping up speculative construction in the better-than-expected post-COVID years through 2024, Sun Belt homebuilders — namely Florida and Texas — were left with an oversupply of standing inventory. The decline in new construction in 2025 is a correction for this imbalance in supply.
These market dynamics are not happening in the Northeast and Midwest states, which did not experience the same population shifts during and after the pandemic.
“These are the states that really haven’t seen the pandemic shift. So these are the states that have been able to withstand the volatility much better,” said Danushka Nanayakkara, AVP, Forecasting and Analysis at NAHB, during a session this week at the International Builders’ Show (IBS).
Multifamily starts in buildings with five units or more were up about 18% by 2025, although Robert Dietz, chief economist at NAHB, said some in the industry are questioning those numbers. The government shutdown last fall could have something to do with that.
“There are a lot of private data providers who would say multifamily construction starts are down in 2025 and the census data is incorrect,” Dietz said. “My guess is that if we get revisions in the Census data, it won’t be an 18% gain, but an increase on the year nonetheless.”
NAHB predicts that housing starts – single- and multi-family – will see a 1% increase in 2026. Nanayakkara pointed out some structural changes in housing that will continue to impact the sector in the short term.
“We have a skilled labor shortage for about 300,000 people, as well as lot issues, financing issues and regulatory issues, which add about $94,000 per single-family home in pure regulation,” she said.
NAHB predicts that single-family home starts will increase 5.0% through 2027 as an expected decline in mortgage rates is likely to release pent-up demand in the housing market. Many buyers, economists and industry insiders, say they are waiting for lower mortgage rates until they buy a new home.
The Federal Reserve is expected to cut rates twice this year, but Dietz doesn’t expect a sustained period of rates below 6.0% until 2027.
The NAHB/Wells Fargo Housing Market Index (HMI) builder confidence gauge is still negative this month, at 36, down six points year-over-year.
However, homebuilders at the International Builders’ Show are showing cautious optimism. Many builders are reporting an encouraging increase in traffic and demand since mid-December, although it is too early to say whether this will continue into a strong spring sales season.
The monthly BTIG/HomeSphere A survey of small and medium-sized homebuilders released Wednesday found that builders reported stronger demand in January than in December.
According to the survey, 38% of builders reported year-over-year traffic increases in January, compared to 26% last month. Only 19% experienced a decrease in traffic in January, compared to 39% in December.
Related
#number #housing #projects #fell #builders #indications #rebound