Residential Construction Falls to Post-Pandemic Low

Residential construction activity slowed dramatically in the fall, reaching a five-year low in October amid the federal government shutdown, a delayed report reveals.

Total housing starts were at a seasonally adjusted annual rate of 1.246 million in October, down 4.6% from September and 7.8% less than a year earlier, the U.S. Census Bureau reported on Friday.

The October figure, delayed by several months due to the shutdown, was the lowest level for housing starts since May 2020, during the heart of COVID-19 lockdowns.

The decline was driven by a sharp decrease in multifamily construction, with starts on buildings with five units or more falling almost 25% on the month to a five-month low.

Single-family starts, on the other hand, rose 5.4% on the month to an annualized 874,000 pace, though they remained near their lowest level in two years.

"All told, this delayed but much anticipated data release paints a bit of a gloomy picture for home construction that is driven by builders’ lack of confidence in their ability to sell homes at a price that makes it economically viable for them," says Realtor.com® senior economist Joel Berner. "What’s plaguing the market in 2025 is uncertainty."

Homebuilder sentiment remains low despite recent rate cuts at the Federal Reserve, with builders reporting headwinds from high materials costs and weak demand from buyers who are struggling with affordability and uncertain about the economy.

Overall builder confidence in the market for newly built single-family homes remained low at 39 last month, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Any reading below 50 reflects negative sentiment about the market.

"The housing market is struggling with trepidatious buyers, leading to an inventory glut and rising time on market, especially in the South and West, where a majority of new homes are built," says Berner. "Builders, in response, are pulling back."

In recent days, President Donald Trump has renewed his vow to tackle the housing affordability crisis, proposing a ban on institutional investor ownership of single-family homes.

Trump also said on Thursday night that he had directed Fannie Mae and Freddie Mac to purchase $200 billion in mortgage-backed securities, a move intended to bring mortgage rates lower.

"This will drive mortgage rates down, monthly payments down, and make the cost of owning a home more affordable," he promised on his Truth Social site. "It is one of my many steps in restoring affordability, something that the Biden administration absolutely destroyed."

Permits rise off August low, offering hope of a rebound

The new census report, delayed by several months due to the government shutdown, is the first reading on residential construction activity since August, and includes combined results for September and October.

The report shows that permits, a sign of future construction activity, rose 6.4% in September from the five-year low reached in August. Permit activity was little changed in October, down just 0.2% from the September level.

The September uptick breaks a five-month streak of declines that marked the longest stretch of falling permit activity since late 2008, when the housing crash and Great Recession all but halted new building activity.

Permits rose in September for both single-family homes (+2.6%) and multifamily buildings with five units or more (+14%).

In a positive sign, the strongest permitting gains for all project types were in the inventory-strapped Northeast, where they were up 5.8% year over year.

"This is an encouraging sign that builders are responding to price signals that show new-home demand is the strongest in that region," says Berner.

Meanwhile, the sharpest decline in permits was among single-family homes in the West, where inventory now exceeds pre-pandemic levels, and the price premium on new-construction homes compared with existing homes is low.

"Again, we see the market working as intended, attracting builders to parts of the country where housing is most needed and their profits can be higher," says Berner.