Housing starts slump

January 9, 2026

Housing starts, another name for new home construction, slumped 4.6% in October after rising by 1.2% in September. Starts reached 1.25 million in October, the lowest level since May 2020, due to weak multifamily construction. The Census Bureau released both months of data with a lag due to the government shutdown that occurred from October 1 to November 12. The South and Midwest recorded gains in October, while the West and Northeast saw losses.

Single-family starts jumped 5.4% in October after September starts fell by 4.6%. On an annualized basis, single-family starts fell to the lowest level in almost three years in September but rebounded slightly in October. The good news is that completions of single-family homes hit one million again, rising 6% in October, a 2% gain from a year ago. One million homes per year appears to be the speed limit at which builders have been operating under over the last few years, even including the era of ultralow mortgage rates. Labor and land shortages and rising regulatory and input costs are among the reasons builders have had difficulty ramping up when demand was robust.

Multifamily starts for building of five units or more dropped 26% in October after rising 13.9% in September. The series are volatile; on a three-month-moving average, multifamily starts slumped 8.2% in October. Completions fell 8.9% in October, down 41.9% from a year ago. That has pushed up rents in many parts of the country where there is barely any new supply of apartments coming on line. Rising rents have pushed investors back into the multifamily space, which will help construction over the next year; applications for building permits are already rising.

Multifamily permits for five units or more jumped 14% in September and 0.4% in October; permits jumped 17.9% compared to a year ago. After working through record levels of apartment backlogs in 2023 and 2024, builders pivoted away from that space as rents started to fall. In 2026, construction will ramp up due to rising rents, strong household formation and lack of housing affordability.

Single-family permits rose 2.6% in September when mortgage rates came down but since dropped 0.5% in October. Compared to a year ago, single-family permits fell 9.4%. Builders remain cautiously optimistic about ramping up construction activity at a time when affordability challenges are keeping potential buyers sidelined for longer. According to the National Association of Home Builders, sentiment of builders remains in pessimistic territory to the end of 2025, but future sales expectations in October rose to the highest level in nine months.

Mortgage rates have remained between 6% - 6.5% since September, which has helped some sidelined buyers enter the housing market. There are now more mortgage holders with a greater-than-6% mortgage rate than a less-than-3% mortgage rate; this helps unlock some of the frozen inventory in the resale market. Builders have taken a larger share of the market in recent years. As more resale homes start to list again, builders will need to continue offering sales incentives to get buyers off the sidelines. Margin compression is already occurring with the rising costs of inputs and land.