Single-family housing starts are softening across the nation as buyers balk at elevated mortgage rates that heighten persistent affordability concerns.
Builders started a seasonally adjusted 883,000 houses in June, the lowest output in nearly a year and down 10% from June 2024, according to data released Friday by the U.S. Census Bureau and the Department of Housing and Urban Development. Multifamily helped overall starts reach 1.321 million, a 4.6% increase from the revised May total but flat compared to a year earlier.
The data also suggests the immediate future for single-family construction is not likely to improve much.
Seasonally adjusted single-family building permits, a leading indicator, fell to 866,000 in June, the fourth straight monthly drop and the lowest level since March 2023. Meanwhile, the 908,000 single-family completions were off from May and a year ago.
With homebuilder sentiment at the lowest point for a July in 13 years, Buddy Hughes, chairman of the National Association of Home Builders, is calling on lawmakers to do their part to help construction.
“Policymakers need to focus on easing high housing costs by eliminating burdensome regulations, promoting careers in the skilled trades, alleviating permitting roadblocks and overturning inefficient zoning rules,” he said in a statement.
The 30-year, fixed-rate mortgage, the most popular loan type, averaged 6.75% on Thursday, up from a week earlier and virtually the same level as one year ago, according to mortgage giant Freddie Mac. Those rates, along with tariff-related economic uncertainty, have left some buyers hesitant to commit during what is usually a busy time for new homes as families look to get settled before the new school year, analysts say.
Benefits in the rental market
Affordability woes "are boosting rental demand and supporting a turnaround in multifamily development," Wells Fargo said in a report also released Friday.
Existing homes for sale are inundating markets across the country, and builders are worried about their own rising levels of unsold new homes, Odeta Kushi, deputy chief economist at financial services firm First American, wrote Friday in a post on social media platform X.
The NAHB/Wells Fargo Housing Market Index that measures builder confidence has been down for 15 consecutive months, and builders are cutting costs to drum up demand, according to the report released Thursday.
In the Dallas-Fort Worth metropolitan area, one of the nation's largest markets for homebuilders, housing starts in the second quarter were flat compared to the second quarter of 2024, with the annual pace falling 6% from a year earlier, according to a report last week from the Residential Strategies consulting firm.
Dallas-area builders are resorting to steeper price cuts just to attract buyers, the report said.
On a regional basis, single-family starts across the South in June fell 12.4% from the same period a year earlier, surpassing declines in the Northeast and West, the NAHB noted. The South is home to much of the Sun Belt that traditionally attracts residents for its strong job growth and warm weather.
Single-family construction rose 10% on an annual basis across the Midwest, "where housing affordability conditions are generally better than much of the nation," NAHB chief economist Robert Dietz said in the statement.