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Student Housing Construction Rises in the Second Quarter of 2025

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Private fixed investment in student dormitories inched up 0.3% in the second quarter of 2025, reaching a seasonally adjusted annual rate (SAAR) of $3.9 billion. This gain followed a 1.1% decrease in the previous quarter, as elevated interest rates placed a damper on student housing construction. Moreover, private fixed investment in dorms was 2.1% higher than a year ago 

Private fixed investment in student housing experienced a surge after the Great Recession, as college enrollment increased from 17.2 million in 2006 to 20.4 million in 2011. However, during the pandemic, private fixed investment in student housing declined drastically from $4.4 billion (SAAR) in the last quarter of 2019 to a lower annual pace of $3 billion in the second quarter of 2021, as COVID-19 interrupted normal on-campus learning. According to the National Student Clearinghouse Research Center, college enrollment fell by 3.6% in the fall of 2020 and by 3.1% in the fall of 2021.  

Since then, private fixed investment in dorms has rebounded, as college enrollments show a gradual recovery from pandemic driven declines. Effective in-person learning requires college students to return to campuses, boosting the student housing sector.  Still, demographic trends are reshaping the outlook for student housing. The U.S. faces slower growth in the college-age population as birth rates declined following the Great Recession. As a result, total enrollment in postsecondary institutions is projected to only increase 8% from 2020 to 2030, according to the National Center for Education Statistics, well below the 37% increase between 2000 and 2010. 

Despite recent fluctuations, the student housing construction shows signs of recovery and future growth is expected in response to increasing student enrollment projections. 

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Housing Share of GDP: Second Quarter 2025

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Housing’s share of the economy registered 16.3% in the second quarter of 2025, according to the advance estimate of GDP produced by the Bureau of Economic Analysis. This reading is unchanged from a revised level of 16.3% in the first quarter and is the same as the share one year ago.

The more cyclical home building and remodeling component – residential fixed investment (RFI) – was 4.0% of GDP, level from 4.0% in the previous quarter. The second component – housing services – was 12.3% of GDP, also unchanged from the previous quarter. The graph below plots the nominal shares for housing services and RFI along with housing’s total share of GDP.  

Housing service growth is 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 for the single-family sector.

In the second quarter, RFI subtracted 19 basis points to the headline GDP growth rate, marking the second straight quarter of negative contributions. RFI was 4.0% of the economy, recording a $1.2 trillion seasonally adjusted annual pace. Among the two segments of RFI, private investment in structures shrunk 4.5%, while residential equipment fell 7.9%.

Breaking down the components of residential structures, single-family RFI fell 12.9%, while multifamily RFI fell 1.3%. RFI for multifamily structures has contracted for eight consecutive quarters. Permanent site structure RFI, which is made up of single-family and multifamily RFI, fell 10.2%. The other structures RFI category rose 0.6% in the second quarter.

The second impact of housing on GDP is the measure of housing services. Similar to the RFI, housing services consumption can be broken out 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 second quarter, housing services represented 12.3% of the economy or $3.7 trillion on a seasonally adjusted annual basis. Housing services expenditures fell 0.2% at an annual rate in the second quarter. Real personal consumption expenditures for housing grew 1.2%, while household utilities expenditures fell 9.2%.

Personal consumption expenditures (PCE) for housing services are the largest component of PCE, making up 18.1% in the second quarter. The second largest component of PCE is health care services, at 17.0%. Expenditures on services totaled $14.2 trillion on a seasonally adjusted annual basis in the second quarter, more than double expenditures on goods ($6.4 trillion).

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Remodeling Market Sentiment Dips in Second Quarter

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In the second quarter of 2025, the NAHB/Westlake Royal Remodeling Market Index (RMI) posted a reading of 59, down four points compared to the previous quarter. While this reading is still in positive territory, some remodelers, especially in the West, are seeing a slowing of activity in their markets. The second-quarter reading of 59 marks only the second time the RMI has dipped below 60 since the survey was revised in the first quarter of 2020.

Higher interest rates and general economic uncertainty have affected consumer confidence and are headwinds for remodeling, but not to the extent that they have been for single-family construction, as is evident in June’s negative reading from the NAHB/Wells Fargo Housing Marketing Index (HMI).  As a result, NAHB is still forecasting solid gains for remodeling spending in 2025, followed by more modest, but still positive, growth in 2026. 

The RMI is based on a survey that asks remodelers to rate various aspects of the residential remodeling market “good”, “fair” or “poor.”  Responses from each question are converted to an index that lies on a scale from 0 to 100. An index number above 50 indicates a higher proportion of respondents view conditions as good rather than poor.

Current Conditions

The Remodeling Market Index (RMI) is an average of two major component indices: the Current Conditions Index and the Future Indicators Index. 

The Current Conditions Index is an average of three subcomponents: the current market for large remodeling projects ($50,000 or more), moderately sized projects ($20,000 to $49,999), and small projects (under $20,000).  In the second quarter of 2025, the Current Conditions Index averaged 66, down five points from the previous quarter.  All three components decreased quarter-over-quarter, with both small and moderately-sized remodeling projects falling six points to 70 and 66, respectively, while large remodeling projects slipped two points to 62.  Nevertheless, all three components remained above 50 in positive territory.

Future Indicators

The Future Indicators Index is an average of two subcomponents: the current rate at which leads and inquiries are coming in, and the current backlog of remodeling projects. 

In the second quarter of 2025, the Future Indicators Index averaged 51, decreasing four points from the previous quarter. While the component measuring the current rate at which leads and inquiries are coming in remained unchanged at 51, the component measuring the backlog of remodeling jobs fell six points to 52.  Similar to the Current Conditions components, both remain above 50 in positive territory.

For the full set of RMI tables, including regional indices and a complete history for each RMI component, please visit NAHB’s RMI web page.

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2025 First Quarter State-Level GDP Data

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Real gross domestic product (GDP) increased in ten states in the first quarter of 2025 compared to the last quarter of 2024, according to the U.S. Bureau of Economic Analysis (BEA). Thirty-nine states reported real GDP declines, while the District of Columbia and Delaware reported no change during this time. The percent change in real GDP ranged from a 1.7 percent increase at an annual rate in South Carolina to a 6.1 percent decline in Iowa and Nebraska.

Nationwide, growth in real GDP (measured on a seasonally adjusted annual rate basis) declined 0.5 percent in the first quarter of 2025. This is the first decline in quarterly real GDP levels in three years. The leading contributors to the decrease in real GDP across the country were finance and insurance; agriculture, forestry, fishing and hunting; and wholesale trade.

Regionally, real GDP growth declined in seven out of the eight regions between the last quarter of 2024 and the first quarter of 2025. The Southeast region was the only territory to post a meager 0.3 percent increase. The percent change in real GDP declines ranged from a 0.3 percent decline in the Southwest and Far West regions, to a 3.3 percent decline in the Plains region.

At the state level, South Carolina posted the highest GDP growth rate (1.7 percent), followed by Florida (1.4 percent) and Alabama (1.0 percent). The percent increase in real GDP ranged from a 1.7 percent increase in South Carolina to a 0.1 percent increase in Georgia. On the other hand, 39 states reported real GDP declines ranging from a 0.1 percent decline in New Hampshire, Ohio, and Texas, to a 6.1 percent decline in Iowa and Nebraska for the first quarter of 2025.

Looking at industry contributions to GDP across states, the “real estate and rental and leasing industry” was the leading contributor to growth in all 50 states and the District of Columbia. In contrast, the agriculture, forestry, fishing, and hunting industry led a decrease in 39 states, and was the leading contributor to economic contraction in 11 states.

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State and Local Property Tax Revenue Grows in the First Quarter

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In the first quarter of 2025, state and local governments experienced an increase in property tax revenue growth. On a seasonally adjusted basis, state and local government property tax revenue grew 1.1% over the quarter, according to the Census Bureau’s quarterly summary of state and local tax revenue. Meanwhile, total tax revenue for state and local governments grew 1.3% over the quarter, with corporate income tax revenue up 6.6%, sales tax revenue up 0.9% and individual income tax revenue up 0.2%.

Property tax revenue stood at $203.4 billion in the first quarter, a slight increase from $201.1 billion in the fourth quarter. While this does show growth over the quarter, growth has notably slowed over the past year. The quarterly growth in the first quarter of 2024 was almost double (2.1%) the current rate. On a year-over-year basis, property tax revenue was 5.2% higher, up from $193.3 billion.

Property taxes typically make up the largest share of the total tax revenue for state and local governments, accounting for over one-third at 37.8% in the first quarter. The second highest revenue source was sales tax at 27.7%, totaling $148.9 billion, followed closely by individual income tax at 26.1% ($140.5 billion). Corporate income tax rounded out the remaining 8.4% at $45.4 billion.

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House Price Appreciation by State and Metro Area: First Quarter 2025

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House price growth slowed in the first quarter of 2025, partly due to a decline in demand and an increase in supply. Persistent high mortgage rates and increased inventory combined to ease upward pressure on house prices. These factors signaled a cooling market, following rapid gains seen in previous years.

Nationally, according to the quarterly all-transactions House Price Index (HPI) released by the Federal Housing Finance Agency (FHFA), U.S. house prices rose 4.7% in the first quarter of 2025, compared to the first quarter of 2024. This year-over-year (YoY) rate was lower than the previous quarter’s rate of 5.5%. The FHFA’s all-transactions HPI tracks average price changes based on repeat sales and refinancings of the same single-family properties. It offers insights not only at the national level but also across states and metropolitan areas.

Between the first quarter of 2024 and the first quarter of 2025, all 50 states and the District of Columbia experienced positive house price appreciation, ranging from 1.0% to 8.4%. Connecticut and Rhode Island topped the house price appreciation list with an 8.4% gain each, followed by New Jersey with a 7.8% gain. On the opposite end, Louisiana recorded the lowest house price appreciation at 1.0%. Out of all 50 states and the District of Columbia, 26 states exceeded the national YoY growth rate of 4.7%. However, on a quarterly basis, home price appreciation slowed in 39 states compared to the fourth quarter of 2024, highlighting a broad-based deceleration in the housing market.

House price growth widely varied across U.S. metro areas year-over-year, ranging from -7.0% to +23.0%. Rome, GA recorded the largest decline in house prices, whereas Johnstown, PA posted the highest increase over the previous four quarters. In the first quarter of 2025, 28 metro areas, in reddish color on the map above, experienced negative house price appreciation. Meanwhile, 356 metro areas experienced price increases.

Since the onset of the COVID-19 pandemic, house prices have surged nationally. Between the first quarter of 2020 and the first quarter of 2025, house prices rose by 54.9% nationwide. More than half of metro areas outpaced this national price growth rate of 54.9%.

The table below highlights the top ten and bottom ten markets for house price appreciation during this five-year period. Among all the metro areas, house price appreciation ranged from 16.7% to 90.1%. Hinesville, GA led the nation with the highest house price appreciation. Lake Charles, LA recorded the lowest appreciation, marking its fourth consecutive quarter at the bottom.

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Residential Mortgages Experience Weaker Demand in First Quarter

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Overall demand for residential mortgages was weaker while lending standards for most types of residential mortgages were essentially unchanged according to the Federal Reserve Board’s April 2025 Senior Loan Officer Opinion Survey (SLOOS).  For commercial real estate (CRE) loans, lending standards for construction & development were moderately tighter, while demand was modestly weaker.  However, for multifamily loans within the CRE category, lending conditions and demand were essentially unchanged for the second consecutive quarter. 

The Federal Reserve left its monetary policy stance (i.e., Federal Funds rate) unchanged during its most recent meeting stating that the Fed “is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”  Nevertheless, NAHB is maintaining its forecast for interest rate cuts in the second half of 2025.

Residential Mortgages

In the first quarter of 2025, only one of seven residential mortgage loan categories saw a slight easing in lending conditions, as evidenced by a positive value for GSE-eligible loans, which was +3.2 in the first quarter of 2025.  Subprime and government loans both recorded a neutral net easing index (i.e., 0) while the other four categories (Non-QM jumbo; Non-QM non-jumbo; QM non-jumbo, non-GSE-eligible; QM jumbo) were negative, representing tightening conditions.  The Federal Reserve classifies any net easing index between -5 and +5 as “essentially unchanged,” however.  By this definition, lending standards changed significantly for only one category of residential mortgages: non-QM jumbo (-7.5).

All residential mortgage loan categories reported significantly weaker demand in the first quarter of 2025, except for QM-jumbo which was essentially unchanged.  The net percentage of banks reporting stronger demand for most of the residential mortgage loan categories has been negative since mid-2022.

Commercial Real Estate (CRE) Loans

Across CRE loan categories, construction & development loans recorded a net easing index of -11.1 for the first quarter of 2025, indicating tightening of credit conditions.  For multifamily loans, the net easing index was -1.6, or essentially unchanged. Both categories of  CRE loans show at least three consecutive years of tightening lending conditions (i.e., net easing indexes below zero).  However, the tightening has become less pronounced recently—especially for multifamily, with its net easing index rising (i.e., becoming less negative) for six straight quarters.

The net percentage of banks reporting stronger demand was -6.3% for construction & development loans and -1.6% for multifamily loans, the negative numbers indicating weakening demand.  Like the trend for lending conditions, demand for CRE loans has become less negative recently, especially for multifamily loans  where the net percentage of banks reporting stronger demand has risen (i.e., become less negative) for six consecutive quarters.

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Consumer Credit Slows in the First Quarter of 2025

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Consumer credit continued to rise in early 2025, but the pace of growth has slowed. Student loan balances rose year-over-year as borrowers resumed payments following the end of pandemic-era relief. However, growth remains modest. Credit card and auto loan debt also increased, though both experienced their slowest annual growth rates in years. Despite historically high interest rates, credit card and auto loan rates have begun to ease slightly, providing some relief for consumers facing elevated borrowing costs.

Total outstanding U.S. consumer credit reached $5.01 trillion for the first quarter of 2025, according to the Federal Reserve’s G.19 Consumer Credit Report. This is an increase of 1.53% at a seasonally adjusted annual rate (SAAR) compared to the previous quarter, and a 1.93% increase compared to last year. Both rates have slowed from the previous quarter.

Nonrevolving Credit

Nonrevolving credit, largely driven by student and auto loans (the G.19 report excludes mortgage loans), reached $3.68 trillion (SA) in the first quarter of 2025. This marks a 1.23% increase (SAAR) from the previous quarter, and a 1.56% increase from last year.

Student loan debt balances stood at $1.80 trillion (NSA) for the first quarter of 2025, marking a 2.48% increase from a year ago. The end of the COVID-19 Emergency Relief—which allowed 0% interest and halted payments until September 1, 2023—led year-over-year growth to decline for four consecutive quarters, from Q3 2023 through Q2 2024, as borrowers resumed payments and took on less new debt. While the past three quarters have shown a return to growth, the current pace of growth remains below pre-pandemic levels.

Auto loans reached a level of $1.56 trillion (NSA), showing a year-over-year increase of only 0.26%, marking the slowest growth rate since 2010. The deceleration in growth can be attributed to several factors, including stricter lending standards, elevated interest rates, and overall inflation. Auto loan rates for a 60-month new car stood at 8.04% (NSA) for the first quarter of 2025, a historically elevated level. However, auto rates have slowed modestly, decreasing by 0.18 percentage points compared to a year ago.

Revolving Credit

Revolving credit, primarily made up of credit card debt, rose to $1.32 trillion (SA) in the first quarter of 2025. This represents a 2.36% increase (SAAR) from the previous quarter and a 2.98% increase year-over-year. Both measures reflect a notable slowdown, marking the weakest growth in revolving credit in several years. This deceleration comes as credit card interest rates remain elevated, with the average rate held by commercial banks (NSA) at 21.37%. Although rates have hovered near historic highs since Q4 2022, the past two quarters have shown modest year-over-year declines, reflecting the impact of rate cuts that began in 2024.

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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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Student Housing Construction Investment Rises in the First Quarter of 2025

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Private fixed investment in student dormitories increased by 2.3% in the first quarter of 2025, reaching a seasonally adjusted annual rate (SAAR) of $4.04 billion. This gain followed a 1.0% increase in the previous quarter. However, private fixed investment in dorms was 2% lower than a year ago, as elevated interest rates place a damper on student housing construction.  

Private fixed investment in student housing experienced a surge after the Great Recession, as college enrollment increased from 17.2 million in 2006 to 20.4 million in 2011. However, during the pandemic, private fixed investment in student housing declined drastically from $4.4 billion (SAAR) in the last quarter of 2019 to a lower annual pace of $3 billion in the second quarter of 2021, as COVID-19 interrupted normal on-campus learning. According to the National Student Clearinghouse Research Center, college enrollment fell by 3.6% in the fall of 2020 and by 3.1% in the fall of 2021.  

Since then, private fixed investment in dorms has rebounded, as college enrollments show a gradual recovery from pandemic driven declines. Effective in-person learning requires college students to return to campuses, boosting the student housing sector.  Still, demographic trends are reshaping the outlook for student housing. The U.S. faces slower growth in the college-age population as birth rates declined following the Great Recession. As a result, total enrollment in postsecondary institutions is projected to only increase 8% from 2020 to 2030, according to the National Center for Education Statistics, well below the 37% increase between 2000 and 2010. 

Despite recent fluctuations, the student housing construction shows signs of recovery and future growth is expected in response to increasing student enrollment projections. 

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