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Best Year for Missing Middle Construction Since 2007 – Eye On Housing

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While not a huge jump, 2025 featured the highest construction volume for multifamily missing middle housing starts.

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 fourth quarter of 2025, there were 5,000 2- to 4-unit housing unit construction starts. This was flat compared to the fourth quarter of 2024.

Over the course of 2025, there were 19,000 such starts, up 6% compared to 2024 (18,000). Nonetheless, 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 5% of total multifamily development for the fourth 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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Builder Sentiment Inches Higher but Affordability Concerns Persist – Eye On Housing

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Builder sentiment inched up in March even as builders continue to express affordability concerns stemming from elevated construction costs and shortages of buildable lots and labor.

Builder confidence in the market for newly built single-family homes rose one point to 38 in March, following a revised upward one-point revision in February, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). All responses to the March survey were received after the conflict with Iran started.

Affordability for buyers and builders remains a top concern. Many buyers remain on the fence waiting for lower interest rates and due to economic uncertainty.

While the Freddie Mac 30-year fixed rate mortgage averaged 6.05% in February, the lowest since August 2022, downpayment hurdles and uncertainty from the conflict with Iran and the price of oil will be headwinds going forward. The administration’s executive orders issued last week to reduce regulatory burdens associated with home building are a positive step toward increasing attainable housing supply.

The latest HMI survey also revealed that 37% of builders cut prices in March, up slightly from 36% in February. The average price reduction remained stable at 6%. The use of sales incentives was 64% in March, down one percentage point from February, and marking the 12th consecutive month this share exceeded 60%.

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 gains in March. The HMI index gauging current sales conditions increased one point to 42 from February to March, the index measuring future sales gained two points to 49 and the index charting traffic of prospective buyers posted a three-point increase to 25.

Looking at the three-month moving averages for regional HMI scores, the Northeast held steady at 44, the Midwest was unchanged at 43, the South held constant at 35 and the West fell two points to 31. 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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Small Gains for New Single-Family Home Size – Eye On Housing

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New single-family home size had been falling since 2015 in response to declining affordability conditions. An exception occurred in 2021, when new home size increased as interest rates reached historic lows. However, as mortgage interest rates increased in 2022 and 2023 and affordability worsened, demand shifted back toward smaller homes.

More recent data suggest these trends have stabilized amid modest affordability improvements. According to fourth quarter 2025 data from the Census Quarterly Starts and Completions by Purpose and Design and NAHB analysis, median single-family square floor area was 2,183 square feet, effectively unchanged from the start of the year. Average (mean) square footage for new single-family homes registered at 2,447 square feet, a small increase.

On a one-year moving average basis, the average size of a new single-family home was essentially unchanged at 2,404 square feet, while the median size remained stable at 2,163 square feet.

Home size trends in 2026 are likely to remain relatively flat, reflecting crosswinds from housing affordability constraints and elevated construction costs.



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

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Flat Conditions for Open Construction Jobs – Eye On Housing

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The number of open positions in construction in January was flat year-over-year, per the Bureau of Labor Statistics Job Openings and Labor Turnover Survey (JOLTS). The current level of open jobs is down measurably from three years ago due to declines in construction activity, particularly in housing. However, recent gains for nonresidential construction combined with soft conditions for housing have left the number of job openings in construction flat.

The number of open jobs for the overall economy increased in January, rising from 5.83 million in December to 6.20 million in January. The January reading was down from a year ago (6.55 million) due to a slowing labor market.

Previous NAHB analysis indicated that this number had to fall below eight million on a sustained basis for the Federal Reserve to move forward on interest rate reductions. With estimates remaining below eight million for national job openings, the Fed, in theory, should be able to cut further.

The number of open construction sector jobs was relatively flat, declining slightly from 245,000 in December to 231,000 in January. This total was flat compared to a year ago (232,000). The chart below notes the declining trend that has been in place for unfilled construction jobs since the Fed raised the federal funds rate and home building weakened. While home building employment was declining during the second half of 2025, other subsectors of the construction industry have expanded (e.g. data centers).

The construction job openings rate decreased to 2.7% in January, equal to the 2.7% rate estimated a year ago.

The layoff rate in construction declined to 1.0% in January. The quits rate decreased to 1.7% for the month.



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

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Custom Home Building Expanded in 2025 – Eye On Housing

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In a year that saw a more than 6% decline for overall single-family housing starts, custom home building posted a gain. 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. With spec home building down and the stock market up, custom building expanded its market share.

According to NAHB’s analysis of Census data from the Quarterly Starts and Completions by Purpose and Design survey, there were 45,000 total custom building starts during the fourth quarter of 2025. This is down 4% relative to the fourth quarter of 2024.

However, for 2025 as a whole, custom single-family housing starts totaled 186,000 homes, a 3% increase compared to 2024 (181,000).

Currently, the market share of custom home building, based on a one-year moving average, is almost 20% 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 some 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.



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

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Weaker Conditions for Single-Family Built-for-Rent Housing – Eye On Housing

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Single-family built-for-rent (or built-to-rent, BTR) construction fell back in the fourth quarter of 2025, as a higher cost of financing and increased multifamily supply crowded out development.

Housing legislation now under final consideration in Congress would also weaken the sector. The legislation, as approved by the Senate, would require institutionally financed new-construction single-family rental housing to be sold to individual home buyers within seven years. This requirement would decrease investable capital and lower housing supply. A preliminary NAHB estimate indicates the proposed rule places approximately 40,000 units per year at-risk.

According to NAHB’s analysis of data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, there were approximately 15,000 single-family built-for-rent (SFBFR) starts during the fourth quarter of 2025. This is down slightly from the fourth quarter of 2024 (16,000 starts).

Over the course of 2025, 68,000 such homes began construction, which is a 19% decrease compared to the 84,000 estimated SFBFR starts in 2024.

The SFBFR market is a source of inventory amid challenges regarding housing affordability and down payment 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 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 (7%) 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 note an elevated share of single-family homes built as condos (non-fee simple), with this share averaging about 4% over recent quarters. Some, but certainly not all, of these homes will be used for rental purposes. Additionally, it is theoretically possible that some single-family built-for-rent units are being counted in multifamily starts, as a form of “horizontal multifamily,” given that 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 (the condo element identifies another difficulty with respect to the 7-year sale requirement of the proposed legislation in Congress).

With the onset of the Great Recession and declines in 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 given market and policy headwinds.



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

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Flat Conditions for Townhouse Construction – Eye On Housing

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Final data for 2025 reveal relatively flat conditions for townhouse construction volume in a year that saw broad-based declines for single-family home building.

Townhouse construction ended 2025 with a soft quarter. According to NAHB analysis of the most recent Census data of Starts and Completions by Purpose and Design, during the fourth quarter of 2025, single-family attached starts totaled 38,000. Despite recent gains, this was the weakest quarter for the sector since the start of 2023.

Over the course of 2025, townhouse construction starts totaled 173,000 homes, effectively flat compared to 2024 (174,000). Townhouses made up more than 17% of all of single-family housing starts for the fourth quarter of the year.

Using a one-year moving average, the market share of newly-built townhouses stood at 18.4% of all single-family starts for the third quarter. In the third quarter of 2025, the four-quarter moving average market share was 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.



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

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Single-Family Starts Remain Soft in January on Affordability Concerns – Eye On Housing

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Elevated construction costs and constrained affordability conditions led to a reduction in single-family housing starts in January.

However, led by solid multifamily production, overall housing starts increased 7.2% in January to a seasonally adjusted annual rate of 1.49 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The January reading of 1.49 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 2.8% to a 935,000 seasonally adjusted annual rate. Weather effects also likely depressed single-family construction in the Northeast, where single-family starts were down 33% from December 2025 and down more than 6% compared to January 2025 readings.

The multifamily sector, which includes apartment buildings and condos, increased 30% to an annualized 552,000 pace. However, this data may be revised lower in future revisions. Furthermore, prior NAHB analysis of the geography of permit data has shown recent gains for apartment construction occurring in lower density areas, such as exurbs, secondary cities and small towns.

On a regional basis compared to the previous month, combined single-family and multifamily starts were 47.4% higher in the Northeast, 10.8% lower in the Midwest, 11.4% higher in the South and 7.5% lower in the West.

Overall permits decreased 5.4% to a 1.38 million unit annualized rate in January. Single-family permits decreased 0.9% to an 873,000-unit rate, which is the weakest reading since August of last year. This is an indicator of relatively flat construction starts conditions for 2026 amid the ongoing affordability crisis. Multifamily permits decreased 12% to an annualized 503,000 pace.

Looking at regional permit data compared to the previous month, permits were 9.6% lower in the Northeast, 9% higher in the Midwest, 3.5% lower in the South and 15.7% in the West.

The number of single-family homes under construction fell back to 582,000 in January, down 8.8% year over year as the single-family home building market has slowed. Despite recent gains for apartment construction, the number of apartments under construction has fallen back to 686,000 units, a 10% decline from January 2025.

The multiyear trend of a smaller number of units under construction is consistent with builders pulling back construction given higher post-covid construction costs and affordability constraints.



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

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Inflation Steady Before War – Eye On Housing

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After months of downward trend, inflation held steady at an eight-month low in February. This report does not reflect the recent surge in oil prices due to Iran conflict beginning February 28. Higher oil prices will likely translate into higher gasoline costs and impact other sectors associated with transportation including airline tickets. This renewed inflation concern would complicate Fed policy especially given the recent weaker-than-expected job report. Additionally, lingering effects from government shutdown will continue to suppress the shelter index through April.

On a non-seasonally adjusted basis, the Consumer Price Index (CPI) rose by 2.4% in February from a year ago, unchanged from January and matching the lowest level since May 2025, according to the Bureau of Labor Statistics (BLS) latest report. The “core” CPI, excluding the volatile food and energy components, increased by 2.5% over the past twelve months, also unchanged from January. The housing shelter index, which makes up a large portion of “core” CPI, rose 3.0% over the year, holding steady from last month. Meanwhile, the component index of food rose by 3.1%, and the energy component index increased by 0.5%.

On a monthly basis, the CPI rose by 0.3% in February (seasonally adjusted), and the “core” CPI increased by 0.2%.

The price index for a broad set of energy sources rose by 0.6% in February, with the decline in electricity (-0.7%) offset by increases in gasoline (+0.8%), natural gas (+3.1%) and fuel oil (+11.1%). Meanwhile, the food at home index rose by 0.4%, while the food away from home index increased by 0.3% in February.

The index for shelter continued to be the largest contributor to the overall monthly increase in all items index. Other top contributors that rose in February included indexes for medical care (+0.5%), apparel (+1.3%), household furnishings and operations (+0.3%), airline fares (+1.4%), and education (+0.2%). Meanwhile, the index for communication (-0.5%), used cars and trucks (-0.4%), motor vehicle insurance (-0.3%) and personal care (-0.2%) were among the few major indexes that decreased over the month.

The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.2% in February. The index for owners’ equivalent rent (OER) rose by 0.2% while and the index for rent of primary residence (RPR) increased by 0.1% over the month. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than core inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster than core inflation, the real rent index rises and vice versa. The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). In February, the Real Rent Index fell by 0.1%, the first monthly decline after remaining virtually flat since August 2025, except for data quality issues in October and November.



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Single-Family Permits End 2025 on a Soft Note – Eye On Housing

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Single-family permitting softened over the course of 2025 and finished the year weaker than the prior year. After showing some resilience in 2024, permitting activity gradually lost momentum as elevated mortgage rates and ongoing affordability constraints weighed on buyer demand. By year’s end, the pace of single-family permit issuance was below the level recorded in 2024, signaling a pullback in new construction. Multifamily permitting followed a more uneven path during 2025, reflecting the sector’s typical volatility, but ended the year on a stronger footing.

Over the year, the number of single-family permits issued nationwide reached 909,280. On a year-over-year basis, this represents a 7.4 percent decline compared with the December 2024 year-to-date total of 981,834. Multifamily permitting activity was stronger, with 516,886 permits issued nationwide, marking a 5.6 percent increase from the same period last year.

Regionally, year-to-date single-family permitting increased in only one of the four regions through December. The Midwest posted a slight gain of 0.3 percent, while activity declined in the Northeast (down 1.9 percent), the South (down 8.5 percent), and the West (down 10.4 percent). Multifamily permits increased in three of the four regions, led by gains in the West (up 17.6 percent), followed by the Midwest (up 9.8 percent), and then the South (up 4.9 percent). The Northeast saw a sharp decline of 12.4 percent, driven largely by a 21.0 percent drop in the New York–Newark–Jersey City metropolitan area.

At the state level, 16 states recorded year-over-year increases in single-family permits between December 2025 year-to-date and December 2024 year-to-date, with gains ranging from 24.0 percent in the District of Columbia to 0.1 percent in New York. The remaining 34 states reported declines, led by Nevada, which posted the steepest drop at 21.3 percent.

The ten states issuing the highest number of single-family permits accounted for 61.8 percent of all single-family permits issued nationwide. Texas continued to lead the country, with 140,002 permits issued over 2025, although this represented an 11.7 percent decline compared with 2024. Florida, the second-highest state, saw permits fall by 10.3 percent, while North Carolina, ranked third, experienced a decline of 6.9 percent.

Between December 2025 year-to-date and December 2024 year-to-date, 31 states recorded increases in multifamily building permits, while 19 states and the District of Columbia experienced declines. Mississippi posted the largest percentage increase, with multifamily permits surging 195.8 percent, rising from 357 to 1,056 units. In contrast, Maryland recorded the steepest decline, with permits falling 32.7 percent, from 5,797 to 3,902 units.

The ten states issuing the highest number of multifamily permits accounted for 60.5 percent of all multifamily permits issued nationwide. Over the course of 2025, Texas, which issued the most multifamily permits, recorded a modest increase of 1.7 percent. Florida, the second-highest state, posted a stronger gain of 29.6 percent, while California, ranking third, saw multifamily permits rise by 21.6 percent.

At the local level, the following are the ten metropolitan areas with the highest number of single-family permits issued.

Below are the ten metropolitan areas with the highest levels of multifamily permitting activity.



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