The National Association of Home Builders' remodeling index dropped to 59 in Q2, marking only the second time since 2020 that the measure has fallen below 60, with western markets particularly affected by economic uncertainty.
A landmark study released by the Home Builders Institute (HBI) and National Association of Home Builders (NAHB) reveals the skilled labor shortage is costing the residential construction industry $10.8 billion annually and preventing the construction of approximately 19,000 single-family homes.
For the first quarter of 2025, single-family construction growth registered modest gains in small metro areas and declines in large metro counties, while apartment growth is shifting to counties with lower population densities.
The narrow price gap between new and existing homes results from tight inventory in the existing market, where homeowners with low pandemic-era mortgage rates are hesitant to sell due to high current rates, combined with post-pandemic price surges across both segments, driven by rising construction costs and supply shortages.
New home sales jumped 10.9% in April to 743,000 units despite high interest rates and construction costs. Home builders call it an anomaly, with 61% now offering sales incentives. Year-to-date sales still down 1.2% as industry faces ongoing economic uncertainty.
Growing economic uncertainty stemming from tariff concerns and elevated building material costs kept builder sentiment in negative territory in April, despite a modest bump in confidence likely due to a slight retreat in mortgage interest rates in recent weeks.
Building professionals can expect modest single-family housing growth this year as regulatory reforms and tax cut extensions counterbalance potential tariff and immigration challenges.
Elevated mortgage rates, regulatory burdens, and tariff concerns are driving up housing costs, with typical families now spending nearly 40% of income on mortgage payments.
Residential construction is increasingly moving to suburban and outlying areas due to rising building costs, land scarcity, and worker shortages, according to a new NAHB report.
October housing starts fell to 1.31 million units annually, with single-family starts down 6.9% but up 9.3% year-to-date. Despite rising mortgage rates, builders remain positive about 2025's outlook, anticipating regulatory improvements and Federal Reserve interest rate cuts to boost construction activity.
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