Housing starts spiked at the end of 2025

February 18, 2026

New home construction, known as housing starts, rose 6.2% in December after a 3.9% increase in November. Stronger activity in the West and Northeast drove the increase. Those gains mask a drop in housing starts of 7.3% from a year ago.

Single-family starts rose 4.1% in December and 5.4% in November. That points to a recovery following a period of retrenchment from July to October. The South and West increased single-family starts. A total of 981,000 units in December is nearing a recent peak of one million units. January and February could be weak due to unusually bad winter weather across the South, the largest housing market.

Mortgage rates drifted lower to about 6.25% in November and December but ended the year even lower. That is more than 50 basis points below the average rate during the Summer and contributed to a rise in starts. Despite pent-up demand, the level of home prices and memories of 3% mortgages are still weighing on potential home buyers.

Multifamily starts jumped 10.1% in December and 3.4% in November. The monthly data can be noisy. On a three-month moving average basis, multifamily starts declined by 4.4% in December after the large drop in October.

Labor shortages are intensifying with the restrictive immigration policy and an aging workforce that is retiring. Construction layoffs have fallen to historically low levels; there were 292,000 job openings at the end of December, higher than a year ago. Compensation rose 4% in the fourth quarter compared to a year earlier, according to the Employee Cost Index (ECI). That contributes to higher costs.

Building permits, which signal future construction activity, rose 4.3% in December after falling 1.6% in November. Single-family permits were basically flat while multifamily permits rose to the highest level since August 2023.

Builder sentiment, as measured by the National Association of Home Builders, remains negative. After a slight uptick in December, sentiment declined to a five-month low in February. The future sales component declined to 46 in February from 54 in October.

Builders are still cutting prices. February was the 11th month in a row that more than 60% of builders offered incentives. Builders face labor and land shortages in many markets, plus regulatory hurdles.