As homebuilder confidence has now bottomed out to a 12-year low, the housing construction industry continues to face a series of hurdles that are severely diminishing activity.
With the latest New Residential Construction report from the Department of Housing and Urban Development and the Census Bureau demonstrating another impacted month, builders are now forecasting issues in home construction to span into 2027.
The latest data on housing starts saw a 5.2% drop month-over-month and a 7.4% drop year-over-year to a rate of 1,221,000. August’s original rate of 1,275,000 starts did see an upward revision, but only to 1,288,000.
Single-family starts were down 4.6% month-over-month to a rate of 859,000, but saw a little positivity year-over-year (up 2.6%). Multifamily starts—which have previously performed better—were down 7.2% month-over-month and a whopping 25.9% year-over-year to a rate of 349,000.
Danushka Nanayakkara-Skillington—the National Association of Home Builders’ (NAHB) assistant vice president for forecasting and analysis—said that the decline in starts “reflect(s) the high borrowing costs and affordability challenges builders face, consistent with our recent builder surveys.”
She also noted that this month’s data “align(s) with our forecast of lower production in 2026, with further declines expected in 2027 as rates stay elevated and material costs rise.”
NAHB Chairman Bill Owens added that a “sustained increase in home building is key to long-term affordability, but near-term construction depends on mortgage rates, financing conditions and efforts to ease regulatory barriers.”
Construction snapshot
Regionally, the South was the only one of the four census regions to see a boost in starts, with a rise of 6.1% month-over-month and 11% year-over-year.
Realtor.com® Senior Economist Joel Berner explained that the South “is the region that sees the lion’s share of new construction activity, but softness in the other regions dragged the national figure down.”
Housing completions saw a slight point of positivity, rising 2.2% month-over-month to a rate of 1,192,000. However, this figure was still down 14% year-over-year. The slight monthly boost is likely due to a 14.9% month-over-month boost in multifamily completions, however, these units were still down a whopping 20.4% year-over-year. Single-family completions remain troubled, down 2.4% month-over-month and 11% year-over-year.
As for an indication of potential building to come, permit data this month saw what Berner described as the “least dramatic pullback.” Permits were down only 0.2% month-over-month to a rate of 1,403,000, with a wider gap of -3% year-over-year. A 5.9% month-over-month and 1% year-over-year rise in multifamily permitting were a strong contributor to the lesser fall.
Single-family permitting, on the other hand, remained on a more negative trend, down 4% month-over-month and 4.8% year-over-year.
Berner added that the slightly better numbers in permitting is a “sign that builders have some optimism for future projects once the current conditions of high mortgage rates and elevated construction costs subside.”
Permitting also saw a regional boost in the Northeast (up 13.3% month-over-month), the South (up 1.5% month-over-month) and the Midwest (up 0.5% monthly-over-month and 4.4% year-over-year).
“The market is not conducive to building right now, and the diminished starts and completions figures make that clear,” continued Berner. “However, the relative resiliency of new home permitting shows that builders see these conditions as temporary.”
