What happened
New residential construction activity posted a small comeback in December, but another weak month in November leads the 2025 annual totals for permits, starts, and completions to come in behind last year’s levels. 2025 was a challenging year for builders, one in which they had to offer lucrative incentives and slash prices to engage buyers, and the weak demand for homes combined with rising costs of land, labor, and materials has led builders to pull back. The 1,425,200 homes permitted for construction in 2025 were a 3.6% downgrade from 2024. The 1,358,700 homes started in 2025 nearly kept pace with the previous year (just 0.6% below), but the 1,497,800 homes completed in 2025 fell 7.9% short of 2024. A lack of builder confidence is leading to fewer new homes hitting the market.
Where it happened
Permits in December were down 2.2% year over year, but the downshift is not happening across the board. It’s concentrated in the single-family home space, which fell by 10.9% year over year, while multifamily construction actually picked up by 18.7%. In the current environment of compressed margins and slow home sales, builders are focusing more on bigger projects with better returns. Regionally, permitting fell hardest in the South (-10.9%), the region with the most new-construction activity. Meanwhile, the Midwest fell by 5% and the Northeast and West actually posted permitting gains of 17.4% and 13.5%, respectively. It’s encouraging to see some early pipeline growth in Northeast, as the region has consistently seen the least new-construction activity in recent years.
Housing starts mirrored the regional pattern of permits, with the South posting a 16.1% year-over-year decrease and the Midwest falling by 13.2%. Meanwhile, the Northeast saw a 2.7% improvement from last year and starts in the West rose by 19.7%. The strong gains out West are focused in the multifamily space, as single-family home starts actually fell by 9.4% year over year. The national picture shows more strength in the multifamily segment as well, with just a 1% reduction in the number of units started in projects of five units or more compared to the 9% reduction in single-family units.
Home completions fared quite differently, and December’s pace of completions was just 0.1% below the pace of December 2024. Single-family home completions grew 10.2% while multifamily completions fell 15.9%. The Northeast saw a major influx of multifamily homes come onto the market, as the overall completions figure grew by 56.1% year over year at the same time that single-family home completions fell by 30.3%. Completions grew in the Midwest (8.4%) and South (4.2%) as well, but fell by 29.1% in the West.
What does this mean for homebuyers, sellers, homeowners, and the housing market
Taken together, these results point to a slightly disappointing 2025 for builders and a cautious start to 2026. Especially in the single-family home segment, builders are wary of being left with inventory they can’t sell as buyers face their own uncertainty and grapple with mortgage rates above 6%. Builders are slowing down, but the country still faces a housing shortage that can only be addressed in the long run by building more homes. Without a jolt of confidence for both buyers and builders, progress will not be made toward closing that gap.
