Key facts
- Single-family housing starts rose 7.6% in August but are down 4.9% year-to-date.
- Total housing starts fell 1.2% compared to August 2025.
- Economists predict negative growth in housing starts through 2027.
- Rising material costs, labor shortages, and elevated borrowing costs are impacting homebuilders.
- 80-90% of new home sales now require mortgage rate buy-downs.
Single-family housing starts saw a monthly increase in August, but overall construction activity remains subdued and is projected to decline further through 2027. The U.S. Census Bureau and HUD reported that total new residential construction fell 2.6% in August, driven by a significant 21.7% drop in multifamily starts. Overall housing starts slipped to a seasonally adjusted annual rate of 1.275 million units, a 1.2% decrease from the previous year.
Despite a 7.6% monthly rise in single-family starts to 918,000 units, the year-to-date figures show a 4.9% decline compared to the same period in 2025. This indicates a cautious approach by homebuilders, who are managing elevated inventory levels and facing hesitant buyer demand, according to Mark Fleming, Chief Economist at First American. Builders are offering incentives and constructing smaller homes, but persistent high mortgage rates and concerns over rising material costs and labor shortages continue to dampen sentiment, noted Zillow Senior Economist Kenny Lee.
Completions also decreased, with single-family completions falling 10.4% from July to an annual rate of 816,000 units. Total housing completions were down 11.9% from July, reaching 1.128 million units annually, a 27.1% decrease from August 2025. The total number of housing units under construction also declined 3.2% year over year.
Economists have revised their outlooks downward. Michael Guckes, Chief Economist at ConstructConnect, predicts a 5.9% drop in single-family starts for 2026. Selma Hepp, Cotality Chief Economist, now forecasts a 2% decline in starts in 2026 and a 4% decline in 2027, citing a "perfect storm" of rising costs, including borrowing costs, and labor shortages. She noted that 80-90% of new home sales now require mortgage rate buy-downs. U.S. Bank's outlook is more optimistic but still subdued, predicting housing starts to hold at 1.36 million in 2026 before slightly declining in 2027 and 2028.