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Housing’s Share of the Economy Falls Again as It Continues to Face Headwinds – Eye On

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Housing’s share of the economy was 15.7% in the third quarter of 2026, according to the latest estimates of GDP produced by the Bureau of Economic Analysis. This share is down from 15.8% in the second quarter and down from 16.0% a year ago. Residential construction, measured by residential fixed investment, fell for the sixth time over the past eight quarters.

The more cyclical home building and remodeling component–residential fixed investment (RFI)–was 3.6% of GDP, even with the previous quarter. The second component, housing services, was 12.2% of GDP, also even with the previous quarter. The graph below plots the share for housing services and RFI, along with housing’s total share of nominal GDP.

Housing service expenditures are much less volatile when compared to RFI due to the cyclical nature of RFI. Historically, RFI has averaged roughly 5% of GDP, while housing services have averaged between 12% and 13%, for a combined 17% to 18% of GDP. These shares tend to vary over the business cycle. However, the housing share of GDP lagged during the post-Great Recession period due to underbuilding, particularly in the single-family sector.

In the third quarter, RFI subtracted 12 basis points from the headline GDP growth rate. This reversed the 10 basis points that RFI added to GDP growth in the second quarter. RFI declined 3.3% in the third quarter on an annualized basis to a seasonally adjusted annual rate of $1.17 trillion, down from $1.18 trillion in the second quarter.

RFI can be split into two segments: structures and equipment. Residential structure investment not only consists of new single-family and multifamily units but also includes manufactured homes, improvements, and dormitories. Residential equipment, which accounts for under 2% of total RFI, consists of furniture or household appliances that are purchased by landlords for rental to tenants. Real private investment in structures fell 3.6%, while investment in residential equipment rose 9.9%.

Breaking down the components of residential structures, single-family RFI fell 5.0%, while multifamily RFI rose 0.3%. Permanent site structure RFI, which is made up of single-family and multifamily RFI, fell 3.8%. The “other structures” RFI category was down 3.4% in the third quarter. This component consists primarily of manufactured homes, improvements, and dormitories. On a seasonally adjusted annual basis in the third quarter, private investment in permanent site structures was at $514.9 billion, while other structures totaled $635.4 billion.

While RFI has declined over the past year, nonresidential fixed investment has grown substantially. In the third quarter, nonresidential fixed investment grew 12.7%, the seventh straight quarter of growth. Most of this investment is in nonresidential equipment, as it grew 20.9% in the third quarter. This was led by investment in information processing equipment, specifically computer equipment. Nonresidential structure investment rose 5.4% in the third quarter, led by commercial and health care structure investment. Notably, investment in manufacturing structures fell by double digits for the seventh straight quarter, with a decline of 15.3% on an annualized rate in the third quarter.

The second impact of housing on GDP is the measure of housing services. Similar to RFI, housing services consumption can be broken into two components. The first component, housing, includes gross rents paid by renters, owners’ imputed rent (an estimate of how much it would cost to rent owner-occupied units), rental value of farm dwellings, and group housing. The inclusion of owners’ imputed rent is necessary from a national income accounting approach, because without this measure, increases in homeownership would result in declines in GDP. The second component, household utilities, is composed of consumption expenditures on water supply, sanitation, electricity, and gas.

For the third quarter, housing services represented 12.2% of the economy or $4.0 trillion on a seasonally adjusted annual basis. Real housing services expenditure rose 2.8% at an annual rate in the third quarter. Real personal consumption expenditure for housing grew 1.1%, while real household utilities expenditures rose 15.3%.

Personal consumption expenditure (PCE) on housing services is the largest component of PCE, making up 18.0% in the third quarter. The second largest component of PCE is health care services, at 17.0%. Expenditure on services was $15.4 trillion on a seasonally adjusted annual basis in the third quarter, more than double the expenditure on goods ($6.9 trillion).



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Builder Sentiment Falls on Rising Rates – Eye On Housing

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Rising mortgage rates, energy and material costs, and worsening labor and lot conditions have pushed builder sentiment to a 14-year low.

Builder confidence in the market for newly built single-family homes fell three points to 29 in October, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The reading was the lowest since June 2012.

Housing remains squeezed by supply-side constraints and significant affordability challenges. Mortgage rates have climbed well above 7% in recent weeks. Though builders are also contending with higher costs for construction loans, building materials and diesel, the administration’s efforts to advance regulatory reform are helping to ease some of the cost pressures they face.

Demand persists, but higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines. As a result, buyer traffic has fallen to its lowest level since April 2012, excluding the pandemic’s onset in April 2020.

Nationwide, more than one-third of builders reported immigration enforcement activity in their market areas during the past month, causing construction delays and discouraging legal workers from reporting to work.

The latest HMI survey found that 43% of builders cut prices in October, the highest share during the 2020-2026 period. The average price cut remained at 6% for the seventh consecutive month. Meanwhile, 65% of builders reported using sales incentives in October, the 19th straight month at least 60% of builders have done so.

Derived from a monthly survey that NAHB has been conducting for more than 40 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

All three of the major HMI indices posted losses in October. The index measuring current sales conditions fell two points to 33, the index gauging future sales expectations dropped five points to 32 and the index charting prospective buyer traffic fell five points to 18.

Looking at the three-month moving averages for regional HMI scores, the Northeast dropped one point to 38, the Midwest fell three points to 40, the South fell one point to 30 and the West posted a two-point decline to 26. The Midwest is a relatively bright spot for single-family home building, with permits up 2.9%

The HMI tables can be found at nahb.org/hmi.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Builder Sentiment Falls on Higher Interest Rates and Costs – Eye On Housing

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Higher mortgage rates, worsening labor shortages and rising material costs are weighing on builder sentiment.

Builder confidence in the market for newly built single-family homes fell three points to 32 in September, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.

Buyer traffic has weakened across much of the country, largely because of rising mortgage rates. Builders also continue to face higher material costs, rising gas and diesel prices and persistent labor shortages. In some markets, builders report that increased immigration enforcement is discouraging legal workers from reporting to job sites.

The HMI shows builder confidence at its lowest level since September 2025, as tight lending conditions and elevated land, labor and construction costs persist. Notably, 42% of builders rated current lot availability as poor and 38% as fair.

The latest HMI survey found that 38% of builders cut prices in September, up from 35% in August. The average price cut remained at 6% for the sixth consecutive month. Meanwhile, 66% of builders reported using sales incentives in September, up from 63% in August and the highest share since 67% posted in December.

Derived from a monthly survey that NAHB has been conducting for more than 40 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The index measuring current sales conditions in September fell four points to 35, the index gauging future sales expectations dropped six points to 37 and the index charting prospective buyer traffic held steady at 23.

Looking at the three-month moving averages for regional HMI scores, the Midwest dropped one point to 44, the Northeast fell five points to 39, the South fell one point to 31 and the West posted a one-point gain to 28.

The HMI tables can be found at nahb.org/hmi.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Single-Family AD&C Lending Falls Back in Q2 – Eye On Housing

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Single-family construction lending fell slightly in the second quarter, according to data released by the Federal Deposit Insurance Corporation. The volume of 1-4 family residential construction and land development loans outstanding was down 0.4% from the first quarter. The total volume of outstanding AD&C loans, which includes both nonresidential and residential construction loans, rose for the first time in nine quarters.

In the second quarter of 2026, the total level of outstanding AD&C loans rose to $453.5 billion, up from $453.3 billion in the previous quarter. The volume of 1-4 family residential construction and land development loans fell to $91.3 billion in the second quarter, down 0.4% from a quarter earlier. Despite the quarterly decline, the volume of 1-4 family residential was up 1.7% from last year. This marked the fourth straight quarter showing a year-over-year increase. The volume of all other real estate development loans rose to $362.1 billion, up 0.1% from the first quarter but down 4.6% from a year ago.

It is worth noting that the FDIC data represents only the stock of loans, not changes in the underlying flows, so it is an imperfect data source. Nonetheless, lending remains much reduced compared with years past. The current amount of existing 1-4 family residential AD&C loans now stands 56% lower than the peak level of residential construction lending at $204 billion during the first quarter of 2008. Alternative sources of financing, including equity partners, have supplemented this capital market in recent years.

Quality Metric of Construction Loans

The volume of loans that were 30+ days past due or in nonaccrual status fell in the second quarter, to $967.8 million. As a share of the total 1-4 family residential construction loan volume, this accounts for 1.1%.

Breaking this out further, the level of loans 30-89 days past due was $425.9 million, while the volume in nonaccrual status was $492.2 million. The nonaccrual loan volume fell from $493.7 million in the first quarter, and the 30-89 past due volume fell from $451.5 million.

Loans are classified as nonaccrual when one or more of the following conditions apply: the loan is 90 days or more past due on principal or interest (unless it is well-secured and in the process of collection); the bank no longer expects full repayment of principal and interest; or the borrower’s financial condition has significantly deteriorated, warranting cash-basis accounting.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Multifamily Missing Middle Falls Back – Eye On Housing

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Multifamily missing middle construction declined during the second quarter of 2026.

The missing middle construction sector includes development of medium-density housing, such as townhouses, duplexes and other small multifamily properties. The multifamily segment of the missing middle (apartments in 2- to 4-unit properties) has generally disappointed since the Great Recession.

For the second quarter of 2026, there were 3,000 2- to 4-unit housing unit construction starts. This was down significantly compared to the second quarter of 2025.

Over the last four quarters, there were 16,000 such starts, down from the prior four quarter period (21,000). Despite some gains in 2025, this subsector of residential construction continues to underperform relative to its potential, due in part to zoning restrictions.

As a share of all multifamily production, 2- to 4-unit development was just 3% of total multifamily development for the second quarter. This remains lower than recent historical trends. From 2000 to 2010, such home construction made up a little less than 11% of total multifamily construction.

Construction of the missing middle has clearly lagged during the post-Great Recession period and will continue to do so without zoning reform focused on light-touch density.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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AD&C Loan Volume Falls Despite Declining Financing Costs – Eye On Housing

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Single-family construction lending fell in the fourth quarter, according to data released by the Federal Deposit Insurance Corporation (FDIC). The decline in the outstanding volume of acquisition, development and construction (AD&C) loans occurred even with two Federal Reserve rate cuts in the fourth quarter. Additionally, NAHB’s AD&C Financing Survey points to continued tightening in credit conditions in the fourth quarter notwithstanding the latest decline in financing rates. Economic uncertainty remains a leading factor behind the persistence of tighter financing conditions for residential construction.

In the fourth quarter of 2025, the total level of outstanding AD&C loans fell to $456.3 billion, down 1.5% from the third quarter. The quarterly decline was led by a drop in other real estate development loans, which decreased 1.8% over the quarter to $365.2 billion. Meanwhile, the volume of 1-4 family residential construction and land development loans declined to $91.1 billion in the fourth quarter, down 0.2% from a quarter earlier. Although the volume of 1-4 family residential construction loans fell over the quarter, the outstanding amount was up 1.7% from last year. This marked the second straight quarter showing a year-over-year increase.

It is worth noting that the FDIC data represent only the stock of loans, not changes in the underlying flows, so it is an imperfect data source. Nonetheless, lending remains much reduced compared with years past. The current amount of existing 1-4 family residential AD&C loans now stands 56% lower than the peak level of residential construction lending of $204 billion reached during the first quarter of 2008. Alternative sources of financing, including equity partners, have supplemented this capital market in recent years.

Quality Metrics of Construction Loans

The volume of loans that are 30+ days past due or nonaccrual status fell for the third consecutive quarter, to $985.3 million. As a share of the total 1-4 family residential construction loan volume, this accounts for 1.1%.

Breaking this out further, the level of loans 30-89 days past due was $414.6 million, while the volume in nonaccrual status was $522.1 million. The nonaccrual loan volume fell from $593.4 million in the third quarter and the 30-89 past due volume fell from $418.5 million.

Loans are classified as nonaccrual when one or more of the following conditions apply: the loan is 90 days or more past due on principal or interest (unless it is well-secured and in the process of collection); the bank no longer expects full repayment of principal and interest; or the borrower’s financial condition has significantly deteriorated, warranting cash-basis accounting.

Which Size Banks are Lending?

Of the outstanding $91.1 billion in 1-4 family residential constructions loans, banks between $1 billion and $10 billion in total assets held the largest share at $32.2 billion (35.3%) at the end of 2025. Banks with assets between $10 and $250 held the next largest share at $30.1 billion (33.0%). The smallest banks, those with under $1 billion in assets, held $19.8 billion (21.7%) while the largest banks, with over $250 billion in total assets, had $9.0 billion (9.9%).

The distribution of banks holding 1-4 family residential construction loans is significantly different from the composition of all bank assets. At the end of 2025, the total amount of assets held by FDIC-insured banks was $25.26 trillion. Most of the banking industry’s assets are held by banks with over $250 billion in total assets, at 60.3%. This large bank asset group is comprised of just 16 banks as of the fourth quarter of 2025. Banks with between $10 billion and $250 billion in total assets held 25.3% of the industry’s total assets, as banks with $1 billion to $10 billion held 10.1%. Banks with under $1 billion in total assets had a market share of 4.3%.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Saving Rate Falls to 3.5% in November – Eye On Housing

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Personal income rose 0.3% in November 2025, following a 0.1% increase in October, according to the latest data from the Bureau of Economic Analysis. Gains were largely driven by higher wages and dividend income. However, income growth has cooled noticeably from peaking at a monthly increase of 1.1% in July 2022 to 0.3% now.

Real disposable income, the amount remaining after adjusted for taxes and inflation, was up 0.1% in November, reversing a 0.1% decline in October. On a year-over-year basis, real (inflation-adjusted) disposable income rose 1%, down from a 7.2% year-over-year recent peak recorded in June 2023.

Consumer spending, meanwhile, remained robust but showed signs of softening. Personal consumption expenditures rose 0.5% in November. Real spending, adjusted to remove inflation, increased 0.3% in November, with expenditures on goods climbing 0.6% and spending on services up 0.2%.

With spending growth outpacing income growth, the personal saving rate decreased to 3.5% in November, the lowest level since late 2022, when core CPI was around the peak. With inflation eroding compensation gains, households are dipping into savings to support spending, especially during the period when some payments were disrupted by the government shutdown. This trend will ultimately lead to a slowing of consumer spending.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Pool Permitting Falls Lower In 2025 – Eye On Housing

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After a rapid expansion of residential swimming pool and spa construction following the pandemic, permit levels in the latest monthly index for December fell to their lowest level since 2020.

The Pool Construction Permit Index, created by NAHB using proprietary data from Construction Monitor, can be used to track pool and spa construction projects nationwide. Perhaps intuitively, the raw data used to create the index has strong seasonality. Most permits are submitted during warmer months, like May and June, while there are typically few pool construction permits collected in November and December.

As of December 2025, pool construction permits were 34.3% lower than the January 2020 reading, our baseline for this index. The index was down 25.5% from the month prior and down 34.7% from one year ago.

As previously mentioned, the raw data displays strong seasonality across months. Due to this seasonality, it is difficult to determine the true trend of residential pool construction. To account for this, a seasonally adjusted index was created to account for the seasonal changes.

For the seasonally adjusted estimates, pool construction permits continued to peak in 2021 but have steadily declined to lower levels. The current December reading is 23.4% lower than our index base of January 2020 and down 26.8% from a month ago and 37.3% lower than last year. The seasonally adjusted data, shown in red below, allows for a clear visualization of how the Pool Construction Permit Index has changed over the past five years. December data was the lowest in the data series.

Geographic Analysis

The index is dependent on where pool construction is most likely to take place. For 2025, almost 1/3rd of pool construction permits were in Florida. The next closest state was California with a 14% share of pool construction. New York and New Jersey were the only states in the Northeast to break the top ten in terms of pool permit shares in 2025.



This article was originally published by a eyeonhousing.org . Read the Original article here. .

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Household Real Estate Asset Value Falls to Start the Year

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The market value of household real estate assets fell from $48.1 trillion to $47.9 trillion in the first quarter of 2025, according to the most recent release of U.S. Federal Reserve Z.1 Financial Accounts. The value of household real estate assets declined for three consecutive quarters after peaking at $48.8 trillion in the second quarter of 2024 but remains 2.1% higher over the year.

Real estate secured liabilities of households’ balance sheets, i.e. mortgages, home equity loans, and HELOCs, increased 0.3% over the first quarter to $13.4 trillion. This level is 2.9% higher compared to the first quarter of 2024.

Owners’ equity share of real estate assets was 72.0% in the first quarter, marking a small decline in owners’ equity share which matches the decline in the market value of households real estate assets. The share in the first quarter of 2024 was 72.2%.

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Multifamily Developer Confidence Falls in the First Quarter

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Multifamily developers are starting the year in a cautious state, according to Q1 2025 results from the Multifamily Market Survey (MMS) released today by the National Association of Home Builders (NAHB).  The MMS produces two separate indices.  The Multifamily Production Index (MPI) decreased three points to 44 year-over-year, marking the seventh consecutive quarter below the break-even point of 50.  The Multifamily Occupancy Index (MOI) had a reading of 82, slightly lower than the 83 reading it recorded in the first quarter of 2024.

The current MPI reading is consistent with NAHB’s forecast for a modest decline in the rate of multifamily production for the remainder of 2025, followed by a modest recovery in 2026. Multifamily builders and developers continue to experience major headwinds from rising construction costs, regulatory barriers, and availability of financing.

Like remodelers and single-family builders, multifamily developers are also being affected by economic policy uncertainty.  In this quarter’s MMS, more than half of the developers reported that their suppliers have increased prices due to announced, enacted or anticipated tariffs.

Multifamily Production Index (MPI)

The MMS asks multifamily developers to rate the current conditions as “good”, “fair”, or “poor” for multifamily starts in markets where they are active.  The index and all its components are scaled so that a number above 50 indicates that more respondents report conditions as good rather than poor. The MPI is a weighted average of four key market segments: three in the built-for-rent market (garden/low-rise, mid/high-rise, and subsidized) and the built-for-sale (or condominium) market.

Three of the four components experienced year-over-year decreases: the component measuring mid/high-rise units fell eight points to 28 and the components measuring garden/low-rise and built-for-sale units both dipped by one point to 54 and 38, respectively.   The component measuring subsidized units was unchanged at 50 year-over-year.

Multifamily Occupancy Index (MOI)

The survey also asks multifamily property owners to rate the current conditions for occupancy of existing rental apartments, in markets where they are active, as “good”, “fair”, or “poor”.  Like the MPI, the MOI and all its components are scaled so that a number above 50 indicates more respondents report that occupancy is good than report it as poor.  The MOI is a weighted average of three built-for-rent market segments (garden/low-rise, mid/high-rise and subsidized). 

Two of the three MOI components experienced year-over-year declines in the first quarter of 2025.  The component measuring subsidized units dropped by five points to 89 and the garden/low-rise component decreased two points to 82.  Meanwhile, the component measuring mid/high-rise units rose two points to 76.  Despite the declines, all three MOI components remain well above the break-even point of 50.

The MMS was re-designed in 2023 to produce results that are easier to interpret and consistent with the proven format of other NAHB industry sentiment surveys.  Until there is enough data to seasonally adjust the series, changes in the MMS indices should only be evaluated on a year-over-year basis.

Please visit NAHB’s MMS web page for the full report.

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