Housing starts led by multifamily construction

July 18, 2025

Housing starts, another name for new home construction, jumped 4.6% in June on stronger multifamily construction. Starts remained 0.5% below year-ago levels. The Northeast, the smallest market for new construction in the country, drove the gains.

Single-family starts slumped 4.6% due to sluggish demand and still-high mortgage rates. The 30-year fixed mortgage rate was trending around 6.8% in June and has remained above 6.5% for the past eight months. Those who can afford to buy with all cash or lucky enough to receive a mortgage rate buydown from one of the larger builders are better situated. Add in the rising costs of insurance and taxes, and affordability has been eroded. Single-family completions fell 12.5% last month.

Multifamily starts soared 30.6% but the series is volatile; smoothing to a three-month-moving average brings us to a 1.8% monthly gain. All regions except the Midwest reported stronger multifamily activity. Completions were down 21%.

Building permits eked out a 0.2% gain but were still 4.4% lower than a year ago. Permits help shine a light on the direction of construction activity. Strength in multifamily permits offset a 3.7% loss in single-family permits. Builders are not comfortable starting new single-family home projects in a rising cost environment while potential buyers remain sidelined. Inventory levels of unsold newly built homes are rising, especially for smaller builders who are unable to offer incentives. High labor and input costs are adding pressure to margins.

Builder sentiment has remained pessimistic for the last 15 months, according to the National Association of Home Builders. Prospective buyer traffic this month has fallen to the lowest level since December 2022, when mortgage rates soared from pandemic lows. Builders are cautiously optimistic about sales six months from now on hopes for lower mortgage rates, but uncertainty prevails.