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Builders’ Top Challenges for 2026 – Eye On Housing

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The most significant challenge builders faced in 2025 was high interest rates, as reported by 84% of builders in the latest NAHB/Wells Fargo Housing Market Index survey.  A smaller, albeit still significant share of 65% expect interest rates to remain a problem in 2026. The next four most serious issues builders faced in 2025 were buyers expecting prices/interest rates to decline (81%), concern about employment/economic situation (65%), the cost/availability of developed lots (63%), and negative media reports making buyers cautious (62%). Builders expect these challenges to persist with limited improvement in 2026.

In addition to those top tier challenges, 54% to 61% of builders also reported facing serious problems in 2025 with cost/availability of labor (61%), rising inflation in the US economy (59%) gridlock/uncertainty in Washington (58%), impact/hook-up/inspection and other fees (57%), and local/state environmental regulations and policies (54%). Looking ahead at 2026, fewer builders expect high interest rates (65%) rising inflation in the US economy (46%) to be a significant problem. On the other hand, builders don’t anticipate much change around labor shortages, uncertainty in Washington, fees, or local regulations.

Builders have been asked about their most serious challenges every year since 2011. High interest rates have been a problem for a negligible share of builders (under 10%) during most years, except for 2022 (66%), 2023 (90%), 2024 (91%) and 2025 (84%). Until 2021, relatively few builders reported problems with buyers expecting prices or interest rates to fall, but that share has been rising steadily for the past four years and reached a record high of 81% in 2025. In 2011, concern about employment/economic situation was reported as a significant problem by 79% of builders. This concern faded over the next decade, and by 2021, only 24% cited it as a top issue. But it has escalated rapidly since then, and in 2025 65% of builders rated it a major challenge – the highest since 2012.

The cost/availability of developed lots has been a serious challenge to most builders in 10 of the 15 years of the series history. In 2024 and 2025, the share reached 63%, matching the record high set in 2019. Negative media reports making buyers caution was a significant problem for 63% of builders in 2011. During the 2012–2021 period, the share consistently remained under 50%. From 2022 onward, however, most builders saw it as a serious challenge again, with the share reaching 62% in 2025 – the highest since 2011.

For additional details, including a complete history for each reported and expected problem listed in the survey, please consult the full survey report.



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

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Mortgage Rates Declined Despite Higher Treasury Yields – Eye On Housing

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Long-term mortgage rates continued to decline in January. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.10% last month, 9 basis points (bps) lower than December. Meanwhile, the 15-year rate declined 4 bps to 5.44%. Compared to a year ago, the 30-year rate is lower by 86 bps. The 15-year rate is also lower by 72 bps.

The 10-year Treasury yield, a key benchmark for long-term borrowing, averaged 4.20% in January – an increase of 8 bps from the previous month, but remained considerably lower than last year by 43 bps. While mortgage rates typically move in tandem with the treasury yields, the spread between the two narrowed during the month. Reports that the Trump administration encouraged Fannie Mae and Freddie Mac to expand purchases of mortgage-backed securities (MBS) boosted demand for MBS, pushing mortgage rates lower.

However, treasury yields rose sharply in the final week of January from global and fiscal pressures. The impact of the rift with Europe and the broader reduction of international purchases of U.S. Treasuries has left a measurable impact on U.S. interest rates. The 10-year Treasury rate at the beginning of 2026 was at 4.11%. That rate has now increased to 4.26%. This unfortunately means the beneficial impact of the $200 billion of additional acquisition of Fannie Mae and Freddie Mac MBS by those GSEs has been partially offset by international concerns.



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Homeownership Rate Inches Up to 65.7% – Eye On Housing

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The latest homeownership rate rose to 65.7% in the last quarter of 2025, according to the Census’s Housing Vacancy Survey (HVS). While this was a modest quarterly increase, the broader picture continues to reflect significant affordability challenges. With mortgage interest rates remaining elevated, and housing supply still tight, housing affordability is at a multidecade low.

Compared to the peak of 69.2% in 2004, the homeownership rate is currently 3.5 percentage points lower and remains below the 25-year average rate of 66.3%. It is also important to note that the fourth quarter’s data comes with a higher level of uncertainty. Due to the government shutdown, the Census only collected data for the last two months of 2025.

Compared to the previous year, homeownership rates increased in only two age groups. Among younger households, the homeownership rate for those under 35 increased 1.6 percentage points to 37.9% in the last quarter of 2025. This age group is particularly sensitive to mortgage rates and the inventory of entry-level homes. Homeownership rates for householders ages 55-64 inched up by 0.4 percentage points over the same time. In contrast, several middle-aged and older groups saw declines. Householders ages 45-54 experienced the largest drop, declining  1.5 percentage points from 71.0% to 69.5%. The 35-44 age group saw a 0.5 percentage point decrease, decreasing from 61.4% to 60.9%.  Homeownership rates for householders aged 65 years and over declined 0.5 percentage points from a year ago.

The national rental vacancy rate inched up to 7.2% for the fourth quarter of 2025, on a steadily increasing trend since 2023. Meanwhile, the homeowner vacancy rate stayed at 1.2%. The upticks in both homeowner and rental vacancy rate signal an increase in the existing home supply.

The housing stock-based HVS revealed that the number of total households increased to 133.7 million in the last quarter of 2025 from 132.2 million a year ago. This increase was driven by both owner and renter household growth. The number of renter households rose by 0.46 million, while owner-occupied households increased by around 1 million over the same period.



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U.S. Population Growth Slows in 2025 – Eye On Housing

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According to the U.S. Census Bureau’s latest estimates, the U.S. resident population grew by 1,781,060 to a total population of 341,784,857. The population grew at a rate of 0.5%, a sharp decline from the near 1.0% growth in 2024. The growth rate was the lowest since 2021 when it grew at 0.2%. The vintage population estimates are released annually and represent the change in the U.S. population between July 1st of 2024 and 2025.

The primary source of population growth continued to be net international migration. For 2025, the level of net international migration was less than half of its level in 2024, falling from 2.7 million to 1.3 million. Natural change, represented as births minus deaths, was up marginally from 514,277 to 518,858 in 2025. The decline in net international migration and stable natural change led to lower population growth nationally between 2024 and 2025.

Each region in the U.S. experienced population growth over the period. The South led in population growth at 0.9%, followed by the Midwest at 0.4%. Meanwhile, the West grew 0.3%, while the Northeast grew the least at 0.2%.

At the state level, 45 States and the District of Columbia saw a population increase over the year. South Carolina had the highest population percentage growth, at 1.5%. This was followed by Idaho (1.4%) and North Carolina (1.3%). Numerically, Texas experienced the largest population increase, gaining 391,243. This was followed by Florida at 196,980 and North Carolina at 145,907.

Five states and Puerto Rico experienced population declines. The population of Puerto Rico fell by 0.6%, followed by Vermont at 0.3% and Hawaii at 0.1%. The other states that experienced population declines were West Virgina, New Mexico and California

California remained the most populous state with a population of 39,355,309. The next most populous state was Texas at 31,709,821. To round out the top five states by total population, the proceeding highest were Florida (23,462,518), New York (20,002,427), and Pennsylvania (13,059,432).



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Bathroom Remodeling Is Most Common Project in 2025 – Eye On Housing

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Every quarter, the National Association of Home Builders (NAHB) conducts a survey of professional remodelers. The first part of the survey collects the information required to produce the NAHB/Westlake Royal Remodeling Market Index (RMI). The survey collects information required to produce an overall reading which is calculated by averaging two indices: 1) the Current Conditions Index and 2) the Future Indicators Index. The Current Conditions Index is an average of three components: the current market for large remodeling projects ($50,000 or more), moderately-sized projects (at least $20,000 but less than $50,000) and small projects (under $20,000). The Future Indicators Index is an average of two components: the current rate at which leads and inquiries are coming in, and the current backlog of remodeling projects. Results for Q4 2025 were released earlier this month which can be accessed here.

In addition to the questions required for the RMI, the quarterly survey often also includes a set of “special” questions on a topic of current interest to the remodeling industry. For the fourth quarter 2025 RMI survey, NAHB asked remodelers how common 22 remodeling projects were for their company in 2025 on a scale of 1 to 5 where 1=not common at all and 5=very common. 

Bathroom remodeling was the most common project in 2025, with an average of 4.1 and 73% of remodelers rating it common to very common (4 or 5). Two other remodeling jobs received average ratings above 3.0: kitchen remodeling (3.9) and whole house remodeling (3.5). Over 50% of remodelers rated both projects as common to very common.  Historically, bathroom, kitchen, and whole house remodeling have been the three most common types of projects undertaken by NAHB remodelers.



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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.



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Holding Pattern for the Fed – Eye On Housing

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The Fed paused its easing cycle at the conclusion of the January meeting of the Federal Open Market Committee, the central bank’s monetary policy body. The Fed held the short-term federal funds rate at a top rate of 3.75%, the level set in December. This marked the first policy pause since the Fed resumed easing in September of last year.

The Fed characterized the economy as being in solid health. The January statement noted:

Available indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained low, and the unemployment rate has shown some signs of stabilization. Inflation remains somewhat elevated.

The Fed’s statement noted the central bank will continue to consider risks associated with both sides of its dual mandate, to maintain maximum employment and stable prices. It is worth noting that the January statement did not include a reference to a concern of higher risk from a weakening labor market, as was specified in December. Thus, the January statement suggests the Fed sees balanced risks from inflation and current labor market conditions.

There was little forward guidance in today’s statement. There were two dissenting votes (Waller, a Fed Chair candidate, and Miran), who voted for a quarter point cut. Both economists have previously made the argument for more dovish monetary policy due to limited tariff effects and an improving productivity outlook that would mute future inflation pressure.

Chair Powell has two remaining meetings at the helm at the Fed. President Trump has promised an announcement soon regarding the next chair, whose candidates include Governor Waller, White House economist Kevin Hassett, prior Fed Governor Kevin Warsh and Rick Reider from Blackrock. Reider’s prospects appeared to have increased in recent weeks.

NAHB is forecasting two additional rate cuts for 2026, based on expectation of modest easing of inflation and a cooled labor market.  

While reductions for the federal funds rate do not have a direct effect on mortgage interest rates, which remain slightly above 6%, federal funds rate reductions do lower interest rates on builder and developer loans, helping the supply-side of the housing market. Supplying more housing and at lower cost is key to solving the ongoing housing affordability challenge. Lower financing costs are part of the overall solution.



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December 2025 – Eye On Housing

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With few exceptions, year-over-year nonfarm employment levels were relatively stable across states at the end of 2025, ranging from a decline of 4.2 percent to a gain of 1.8 percent. Construction employment, however, showed considerably greater dispersion, with declines of up to 9.3 percent in some states and gains approaching 9.0 percent in others.

In December, nonfarm payroll employment increased in 22 states and the District of Columbia compared to November, while 27 states recorded declines; Minnesota reported no change. According to the Bureau of Labor Statistics, total U.S. nonfarm payroll employment rose by 50,000 in December, following substantial downward revisions to the prior two months. For all of 2025, monthly job growth averaged just 49,000, well below the 168,000 average monthly gain recorded in 2024.

On a month-over-month basis, employment gains were led by Texas (+19,700), followed by New York (+19,100) and Illinois (+11,800). In contrast, a total of 53,200 jobs were lost across 27 states, with Indiana posting the largest decline (–7,700). In percentage terms, Montana recorded the strongest increase (+0.4 percent), while Kansas experienced the largest decrease (–0.3 percent) between November and December.

On a year-over-year basis through December, total nonfarm employment increased by 584,000 jobs nationwide, representing a 0.4 percent gain relative to December 2024. Job gains ranged from 1,300 in Massachusetts to 132,500 in Texas. Sixteen states and the District of Columbia collectively lost 115,300 jobs over the past 12 months, with the District of Columbia experiencing the largest decline (–32,400). In percentage terms, job growth ranged from 0.1 percent in Georgia to 1.8 percent in Missouri. Among states with losses, declines ranged from 0.1 percent in California, Kansas, and Connecticut to 0.8 percent in New Hampshire; the District of Columbia, however, recorded a substantially larger decline of 4.2 percent.

Construction Employment

Construction employment —which includes both residential and non-residential construction— showed mixed results in December. Twenty states and the District of Columbia added construction jobs compared to November, while 26 states experienced declines; the remaining four states reported no change. Arizona posted the largest monthly gain, adding 3,900 jobs, while Minnesota recorded the largest loss (–9,900). Overall, the construction sector shed a net 11,000 jobs nationwide in December. In percentage terms, Montana recorded the strongest monthly increase (+3.0 percent), while Minnesota experienced the steepest decline (–6.6 percent).

Year-over-year, U.S. construction employment increased by 14,000 jobs, a 0.2 percent gain compared to December 2024. Texas led all states with an increase of 15,700 construction jobs, while California recorded the largest loss (–19,800). In percentage terms, Hawaii posted the strongest annual growth in construction employment (+8.7 percent), while Nevada experienced the largest decline (–9.3 percent).



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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.



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2025 Third Quarter State-Level GDP Data – Eye On Housing

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In the third quarter of 2025, the Bureau of Economic Analysis (BEA) reported that real gross domestic product (GDP) expanded nationally, with growth recorded across all states and the District of Columbia. The increase in GDP reflected broad-based economic momentum, supported by contributions from several major industries. At the state level, real GDP growth ranged from a 6.5 percent increase in Kansas to a 0.4 percent increase in North Dakota.

Nationally, real GDP, measured at a seasonally adjusted annual rate, increased 4.4 percent in the third quarter of 2025, led by growth in information; finance and insurance; and professional, scientific, and technical services.

Regionally, real GDP increased in all eight regions between the second and the third quarters of 2025. Growth was widespread, with regional gains ranging from a 4.2 percent increase in the New England region to a 4.8 percent increase in the Great Lakes region, underscoring broad economic strength across the country.

Service-providing sectors, including information, finance and insurance, and professional and business services, were key drivers of growth across many states. Agriculture and related industries played an especially important role in select states, including Kansas and South Dakota, which recorded the two highest growth rates in real GDP during the quarter. Manufacturing activity, particularly in durable goods, also contributed to higher output in several regions, including Arkansas and Connecticut, which posted the third- and fourth-largest increases in real GDP, respectively. While most states experienced strong expansion, a small number of states and the District of Columbia posted more modest gains, highlighting regional differences in economic performance.

At the industry level, information services, finance and insurance, and professional, scientific, and technical services were the most consistent contributors to GDP growth nationwide. However, several sectors weighed on growth in specific regions, including management of companies and enterprises; government and government enterprises; nondurable goods manufacturing; and construction, all of which contracted during the third quarter.

Overall, the third quarter state GDP data point to a broadly expanding U.S. economy, with growth evident across all states and supported by a diverse mix of industries. Although the drivers of growth varied by region, reflecting differences in industrial composition, the widespread gains in economic output underscore resilient economic activity at both the state and national levels and suggest continued momentum in overall GDP.



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