Inman News
Negative buyer and builder sentiment matched with growing economic uncertainty to stifle new construction in June, with single-family permits, starts and completions taking the biggest hit
The homebuilding industry’s hot streak is slowing down, with permits, starts, and completions all sliding on an annual basis in the U.S. Census Bureau’s latest new residential construction report.
In June, building permits declined 4.4 percent year-over-year to a seasonally adjusted rate of 1,397,000, while privately-owned housing starts fell 0.5 percent to 1,321,000 during the same period. Meanwhile, housing completions dropped 24.1 percent year-over-year to 1,314,000 — a staggering 417,000 fewer completions than June 2024.
Between multifamily and single-family housing, the most pronounced declines were seen in the single-family housing sector, as permits (-3.7 percent), starts (-4.6 percent) and completions (-12.5 percent) all fell on a monthly basis
“A jump in multifamily construction led to a small uptick in housing permits and starts in June, but overall construction remains weak, with single-family permits and starts at 11+ month lows,” Realtor.com Chief Economist Danielle Hale said in a written statement. “These lows in single-family construction come as nearly two in five builders reported making price cuts in June, underscoring the price sensitivity of today’s homeshoppers.”
First American Deputy Chief Economist Odeta Kushi said softening single-family construction stems from several factors, including negative homebuilder sentiment, weakening homebuyer demand and growing uncertainty from the Trump Administration’s tariff policy.
“Builder sentiment has signaled underlying weakness in the single-family sector. Builder sentiment in July inched higher, but remained in negative territory for the 15th consecutive month,” she said in an emailed statement. “Prospective buyer traffic declined from 21 to 20, marking the lowest reading since 2012, with the exception of three months.”
Kushi said homebuilders are attempting to rouse homebuyer demand with price cuts. However, the measure isn’t yielding the best results, as more homesellers pump the market with existing-home inventory.
“The July Housing Market Index (HMI) survey revealed that 38 percent of builders reported cutting prices, the highest percentage since NAHB began tracking this figure in 2022,” she said. “Price cuts are often used as a last resort incentive, but have become increasingly necessary in today’s market to offset affordability challenges.”
“Builders are not only facing growing competition from the resale market, but also grappling with elevated inventories of their own,” she added. “The months’ supply of new homes increased to 9.8 months in May – well above the pre-pandemic 30-year average of around six months, and up from 8.3 months in April.”
Although overall single-family new construction statistics are looking dim, the National Association of Home Builders said there are pockets of regional strength
Single-family and multifamily permits year-to-date grew in the Midwest by 8.2 percent, while the Northeast (-16.9 percent), South (-3.3 percent) and West (-3.7 percent) dropped. Meanwhile, year-to-date single-family and multifamily starts grew in the Northeast (+28.8 percent) and Midwest (+13.1 percent).
NAHB Chairman Buddy Hughes called on lawmakers to help the housing market with policies that lower permitting and zoning obstacles.
“Single-family building conditions continued to weaken in June as housing affordability challenges caused builder traffic to move lower as buyers moved to the sidelines,” he said in a written statement on Friday. “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.”