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Slight Gains for Townhouse Construction

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Townhouse construction expanded more than 2 percent on a year-over-year basis per data from the first quarter of 2025.

According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the first quarter of 2025, single-family attached starts totaled 43,000. Over the last four quarters, townhouse construction starts totaled a strong 175,000 homes, which is 2% higher than the prior four-quarter period (171,000). Townhouses made up 19% of single-family housing starts for the first quarter of the year, near a data series high.

Using a one-year moving average, the market share of newly-built townhouses stood at 17.6% of all single-family starts for the first quarter. With recent gains, the four-quarter moving average market share is the highest on record, for data going back to 1985.

Prior to the current cycle, the peak market share of the last two decades for townhouse construction was set during the first quarter of 2008, when the percentage reached 14.6% on a one-year moving average basis. This high point was set after a fairly consistent increase in the share beginning in the early 1990s.

The long-run prospects for townhouse construction are positive given growing numbers of homebuyers looking for medium-density residential neighborhoods, such as urban villages that offer walkable environments and other amenities. Where it can be zoned, it can be built.

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Flat Growth for Single-Family Built-for-Rent

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Single-family built-for-rent construction posted flat growth on a year-over-year basis, as a higher cost of financing crowded out development activity.

According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 19,000 single-family built-for-rent (SFBFR) starts during the first quarter of 2025. This is flat relative to the first quarter of 2024. Over the last four quarters, 84,000 such homes began construction, which is a 4% increase compared to the 81,000 estimated SFBFR starts in the four quarters prior to that period.

The SFBFR market is a source of inventory amid challenges over housing affordability and downpayment requirements in the for-sale market, particularly during a period when a growing number of people want more space and a single-family structure. Single-family built-for-rent construction differs in terms of structural characteristics compared to other newly-built single-family homes, particularly with respect to home size. However, investor demand for single-family homes, both existing and new, has cooled with higher interest rates.

Given the relatively small size of this market segment, the quarter-to-quarter movements typically are not statistically significant. The current four-quarter moving average of market share (8%) is nonetheless higher than the historical average of 2.7% (1992-2012).

Importantly, as measured for this analysis, the estimates noted above include only homes built and held by the builder for rental purposes. The estimates exclude homes that are sold to another party for rental purposes, which NAHB estimates may represent another three to five percent of single-family starts based on industry surveys.

The Census data notes an elevated share of single-family homes built as condos (non-fee simple), with this share averaging more than 4% over recent quarters. Some, but certainly not all, of these homes will be used for rental purposes. Additionally, it is theoretically possible some single-family built-for-rent units are being counted in multifamily starts, as a form of “horizontal multifamily,” given these units are often built on a single plat of land. However, spot checks by NAHB with permitting offices indicate no evidence of this data issue occurring.

With the onset of the Great Recession and declines for the homeownership rate, the share of built-for-rent homes increased in the years after the recession. While the market share of SFBFR homes is small, it has clearly expanded. Given affordability challenges in the for-sale market, the SFBFR market will likely retain an elevated market share. However, in the near-term, SFBFR construction is likely to slow until the return on new deals improves.

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Flat Custom Home Building Trends

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NAHB’s analysis of Census Data from the Quarterly Starts and Completions by Purpose and Design survey indicates flat year-over year growth for custom home builders. The custom building market is less sensitive to the interest rate cycle than other forms of home building but is more sensitive to changes in household wealth and stock prices.

There were 34,000 total custom building starts during the first quarter of 2025. This was unchanged relative to the first quarter of 2024. Over the last four quarters, custom housing starts totaled 181,000 homes, just more than a 2% increase compared to the prior four quarter total (177,000).

Currently, the market share of custom home building, based on a one-year moving average, is approximately 18% of total single-family starts. This is down from a prior cycle peak of 31.5% set during the second quarter of 2009 and the 21% recent peak rate at the beginning of 2023, after which spec home building gained market share.

Note that this definition of custom home building does not include homes intended for sale, so the analysis in this post uses a narrow definition of the sector. It represents home construction undertaken on a contract basis for which the builder does not hold tax basis in the structure during construction.

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Single-Family Starts Down on Economic and Tariff Uncertainty

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Economic uncertainty stemming from tariff issues, elevated mortgage rates and rising building material costs pushed single-family housing starts lower in April.

Overall housing starts increased 1.6% in April to a seasonally adjusted annual rate of 1.36 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The April reading of 1.36 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 2.1% to a 927,000 seasonally adjusted annual rate and are down 12.0% compared to April 2024. On a year-to-date basis, single-family starts are down 7.1%. The three-month moving average (a useful gauge given recent volatility) is down to 991,000 units, as charted below.

The multifamily sector, which includes apartment buildings and condos, increased 10.7% to an annualized 434,000 pace. The three-month moving average for multifamily construction has trended upward to a 406,000-unit annual rate. On a year-over-year basis, multifamily construction is up 30.7%.

On a regional and year-to-date basis, combined single-family and multifamily starts were 19.8% higher in the Northeast, 4.4% higher in the Midwest, 3.4% higher in the West , and 7.4% lower in the South.

The total number of single-family homes and apartments under construction was 1.4 million units in April. This is the lowest total since June 2021. Total housing units now under construction are 14.3% lower than a year ago. Single-family units under construction fell to a count of 630,000—down 7.1% compared to a year ago. The number of multifamily units under construction has fallen to 788,000 units. This is down 15.6% compared to a year ago.

On a 3-month moving average basis, there are currently 1.3 apartments completing construction for every one that is beginning construction. While apartment construction starts are down, the number of completed units entering the market is rising due to prior elevated construction levels. Year-to-date, the pace of completions for apartments in buildings with five or more units is down 3.4% in 2025 compared to 2024. An elevated pace of completions in 2025 for multifamily construction will place some downward pressure on rent growth.

Overall permits decreased 4.7% to a 1.41-million-unit annualized rate in April. Single-family permits decreased 5.1% to a 922,000-unit rate and are down 6.2% compared to April 2024. Multifamily permits decreased 3.7% to a 490,000 pace but are up 2.9% compared to April 2024.

Looking at regional permit data on a year-to-date basis, permits were 5.1% higher in the Midwest, 3.5% lower in the West, 3.8% lower in the South, and 20.3% lower in the Northeast.

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Permit Activity Declines in March 2025

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Permits continue a downhill trend for the third month in a row. Over the first three months of 2025, the total number of single-family permits issued year-to-date (YTD) nationwide reached 232,221. On a year-over-year (YoY) basis, this is a decline of 3.8% over the March 2024 level of 241311. For multifamily, the total number of permits issued nationwide reached 113,344. This is 3.7% below the March 2024 level of 117,695.

Year-to-date ending in March, single-family permits were down in three out of the four regions. The Northeast posted an increase of 9.2%. The Midwest was down by 1.9%, the South was down by 4.8%, and the West was down by 5.0% in single-family permits during this time. For multifamily permits, two out of the four regions posted increases. The South was up by 14.6% and the Midwest was up by 12.9%. Meanwhile, the West posted a decline of 13.0% and the Northeast declined steeply by 42.8%.

Between March 2025 YTD and March 2024 YTD, 20 states posted an increase in single-family permits. The range of increases spanned 29.6% in Alaska to 0.2% in Utah. The remaining 30 states and the District of Columbia reported declines in single-family permits with New Mexico reporting the steepest decline of 32.7%.

The ten states issuing the highest number of single-family permits combined accounted for 64.3% of the total single-family permits issued. Texas, the state with the highest number of single-family permits, issued 38,425 permits over the first three months 2025, which is a decline of 5.5% compared to the same period last year. The second highest state, Florida, was down by 8.8%, while the third highest, North Carolina, posted a decline of 0.1%.

Between March 2025 YTD and March 2024 YTD, 23 states and the District of Columbia recorded growth in multifamily permits, while 27 states recorded a decline. Alaska (+533.3%) led the way with a sharp rise in multifamily permits from 12 to 76, while New York had the biggest decline of 64.8% from 11,316 to 3,984.

The ten states issuing the highest number of multifamily permits combined accounted for 61.7% of the multifamily permits issued. Over the first three months of 2025, Florida, the state with the highest number of multifamily permits issued, experienced an increase of 48.8%. Texas, the second-highest state in multifamily permits, saw a decline of 0.5%. California, the third largest multifamily issuing state, decreased by 22.7%.

At the local level, below are the top ten metro areas that issued the highest number of single-family permits.

For multifamily permits, below are the top ten local areas that issued the highest number of permits.

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March Private Residential Construction Spending Dips

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Private residential construction spending declined by 0.4% in March, largely driven by a decrease in home improvement spending. This decline followed five consecutive months of growth. Despite the monthly drop, spending remained 2.8% higher than a year ago, showing the resilience of the housing market.

According to the latest U.S Census Construction Spending data, improvement spending declined by 1.2% in March, aligned with the weakness in the Remodeling Market Sentiment of the first quarter of 2025. Still, spending on improvements was 13.4% higher than in March of 2024. Meanwhile, spending on single-family construction edged up by 0.1% in March, continuing its growth after a five-month decline from April to August 2024. However, single-family construction spending remained 0.8% lower than a year ago. Multifamily construction spending stayed unchanged in March, staying in the downward trends that began in December 2023. Compared to March 2024, it was down 12.1%.

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates and concerns over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in July 2023. Meanwhile, improvement spending has increased its pace since late 2023.

Spending on private nonresidential construction was up 1.6% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending for the class of power ($8.7 billion), followed by the manufacturing category ($8.1 billion).

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Housing Starts Decline Amid Economic Uncertainty

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Constrained housing affordability conditions due to elevated interest rates, rising construction costs and labor shortages led to a reduction in housing production in March.

Overall housing starts decreased 11.4% in March to a seasonally adjusted annual rate of 1.32 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The March reading of 1.32 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 14.2% to a 940,000 seasonally adjusted annual rate over the month and are down 9.7% compared to March 2024. On a year-to-date basis, single-family starts are down 5.6%. The three-month moving average (a useful gauge given recent volatility) is down to 1.01 million units, as charted below.

The multifamily sector, which includes apartment buildings and condos, decreased 3.5% to an annualized 384,000 pace. The three-month moving average for multifamily construction has trended upward to a 381,000-unit annual rate. On a year-over-year basis, multifamily construction is up 48.8%.

On a regional and year-to-date basis, combined single-family and multifamily starts were 10.6% higher in the West, 8.6% higher in the Northeast, 3.3% higher in the Midwest, and 8.5% lower in the South.

The total number of single-family homes and apartments under construction was 1.4 million in March. This is the lowest total since July 2021. Total housing units now under construction are 15.2% lower than a year ago. Single-family units under construction fell to a count of 632,000—down 8.7% compared to a year ago. The number of multifamily units under construction has fallen to 759,000 units. This is down 20.0% compared to a year ago.

On a 3-month moving average basis, there are currently 1.5 apartments completing construction for every one that is beginning construction. While apartment construction starts are down, the number of completed units entering the market is rising due to prior elevated construction levels. Year-to-date, the pace of completions for apartments in buildings with five or more units is down 3.5% in 2025 compared to 2024. An elevated pace of completions in 2025 for multifamily construction will place some downward pressure on rent growth.

Overall permits increased 1.6% to a 1.48-million-unit annualized rate in March. Single-family permits decreased 2.0% to a 978,000-unit rate. Multifamily permits increased 9.3% to a 504,000 pace.

Looking at regional permit data on a year-to-date basis, permits were 4.7% higher in the Midwest, 0.4% higher in the South, 8.8% lower in the West and 24.7% lower in the Northeast.

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Permits Pullback in February 2025

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Permits continue the downward trend for the second month in a row. Over the first two months of 2025, the total number of single-family permits issued year-to-date (YTD) nationwide reached 147,119. On a year-over-year (YoY) basis, this is a decline of 5.2% over the February 2024 level of 155,236. For multifamily, the total number of permits issued nationwide reached 72,979. This is 6.7% below the February 2024 level of 78,259.

Year-to-date ending in February, single-family permits were down in all four regions. The Northeast posted the smallest decline of 0.1%, the Midwest was down by 3.0%, the West was down by 4.5% and the South was down by 6.3% in single-family permits during this time. For multifamily permits, two out of the four regions posted increases. The South was up by 11.8% and the Midwest was up by 9.7%. Meanwhile, the West posted a decline of 18.0% and the Northeast declined steeply by 45.2%.

Between February 2025 YTD and February 2024 YTD, 19 states and the District of Columbia posted an increase in single-family permits. The range of increases spanned 133.3% in the District of Columbia to 0.1% in New Jersey. The remaining 31 states reported declines in single-family permits with West Virginia reporting the steepest decline of 21.1%.

The ten states issuing the highest number of single-family permits combined accounted for 65.6% of the total single-family permits issued. Texas, the state with the highest number of single-family permits, issued 24,960 permits over the first two months 2025, which is a decline of 5.6% compared to the same period last year. The second highest state, Florida, was down by 8.3%, while the third highest, North Carolina, posted a decline of 4.5%.

Between February 2025 YTD and February 2024 YTD, 26 states and the District of Columbia recorded growth in multifamily permits, while 24 states recorded a decline. Iowa (+177.4%) led the way with a sharp rise in multifamily permits from 354 to 982, while Arizona had the biggest decline of 67.5% from 3,209 to 1,044.

The ten states issuing the highest number of multifamily permits combined accounted for 63.2% of the multifamily permits issued. Over the first two months of 2025, Florida, the state with the highest number of multifamily permits issued, experienced an increase of 63.0%. Texas, the second-highest state in multifamily permits, saw a decline of 9.0%. California, the third largest multifamily issuing state, decreased by 21.7%.

At the local level, below are the top ten metro areas that issued the highest number of single-family permits.

For multifamily permits, below are the top ten local areas that issued the highest number of permits.

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Private Residential Construction Spending Rises in February

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Private residential construction spending increased by 1.3% in February, rebounding from a 1.2% dip in January. The growth was largely driven by higher spending on single-family construction and residential improvements. On a year-over-year basis, the February report showed a 1.6% gain, indicating a modest growth in private residential construction spending during market uncertainties. 

The monthly increase in total private construction spending was primarily driven by gains in spending on single-family construction and residential improvements. Single-family construction spending was up 1% for the month, continuing to grow after a five-month decline from April to August 2024. This growth is consistent with strong single-family housing starts in February. However, single-family construction spending remained 0.1% lower than a year ago. Meanwhile, improvement spending rose by 2% in February and was 8.9% higher compared to the same period last year. In contrast, multifamily construction spending stayed flat in February, extending the downward trend that began in December 2023. Compared to a year ago, multifamily construction spending was down 11.6%. 

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates and concerns over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in July 2023. Meanwhile, improvement spending has increased its pace since late 2023.  

Spending on private nonresidential construction was up 2.5% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending for the class of manufacturing ($10.5 billion), followed by the power category ($6.4 billion). 

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Single-Family Housing Starts Hit 12-Month High in February

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Limited existing inventory helped single-family starts to post a solid gain in February, but builders are still grappling with elevated construction costs stemming from tariff issues and persistent shortages related to buildable lots and labor.

Overall housing starts increased 11.2% in February to a seasonally adjusted annual rate of 1.50 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. The February reading of 1.50 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months.

Within this overall number, single-family starts increased 11.4% to a 1.11 million seasonally adjusted annual rate, the highest pace since February 2024. The multifamily sector, which includes apartment buildings and condos, increased 10.7% to an annualized 393,000 pace.

While solid demand and a lack of existing inventory provided a boost to single-family production in February, our latest builder survey shows that builders remain concerned about challenging housing affordability conditions, most notably elevated financing and construction costs as well as tariffs on key building materials.

On a regional and year-to-date basis, combined single-family and multifamily starts were 4.7% lower in the Northeast, 21.5% lower in the Midwest, 8.3% lower in the South and 20.2% higher in the West.

Overall permits decreased 1.2% to a 1.46-million-unit annualized rate in February and were down 6.8% compared to February 2024. Single-family permits decreased 0.2% to a 992,000-unit rate and were down 3.4% compared to the previous year. Multifamily permits decreased 3.1% to a 464,000 pace.

Looking at regional permit data on a year-to-date basis, permits were 30.1% lower in the Northeast, 2.3% higher in the Midwest, 2.1% lower in the South and 12.5% lower in the West.

The number of single-family homes under construction in February was down 6.7% from a year ago, at 640,000 homes. In February, the count of apartments under construction increased 0.3% to an annualized 772,000 pace. It marks the first gain after 18 months of consecutive declines but was still down 20% from a year ago.

There were 526,000 multifamily completions in February, down 15% from the previous year. For each apartment starting construction, there are 1.5 apartments completing the construction process.

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