Housing starts to fall to the lowest point since 2020, led by a stable in the Sun Belt.
Housing starts have slowed the most since May 2020, according to the US Census Bureau’s October report that was delayed by last year’s government shutdown.
The expansion of pockets of demand over the past year has led to an overestimation of homebuilder projections in the market – which was dominant – in the Sun Belt and Mountain West markets. Builders are hitting the brakes on new production to reset the balance of supply and demand. Early indications suggest that 2026 could be another sluggish year for new home construction, especially for multifamily builders and developers, who are facing major challenges — declining sales prices and squeezed profit margins — as they work on their existing assets.
Overall, housing starts fell 4.6% sequentially and 7.8% year-over-year in October. For the year, single-family starts fell 7.8% nationally to 874,000, and unit starts in buildings with five or more units fell 10.8%.
Single-family permit approvals in October totaled 876,000, down 9.4% from a year earlier, suggesting that any significant increase in housing starts in the coming months is unlikely. Every county experienced a decline in new single-family construction permits. But the South (-9.9%) and West (-13.6%) posted the biggest dips, while the Northeast (-4.8%) and Midwest (-2.4%) had more modest declines.
The Sun Belt — the nation’s most active region in new residential construction — is especially challenging for homebuilders, who have ramped up speculative construction in the wake of the COVID pandemic. Now, they are stuck trying to move that existing property, which tends to lose value the longer it sits unsold. This overcrowding has been the main reason for the major metropolitan areas that experienced the biggest drop in home prices last year were in the Sun Belt, led by Austin, Tampa, Miami, Orlando, and Dallas.
The number of single-family homes under construction in October fell 7.0% year-over-year, but the South and West faced the biggest challenge of double-digit declines. The Midwest was the strongest region, with an increase of 2.2%.
Ryan Gilbert, Managing Director at BTIG, tells Builder’s Day that there is unlikely to be a significant increase in new housing starts this year.
“It wouldn’t surprise me if we see a very modest start to the bottom in 2026. But against the background of how much restrictions have come down and incentives have gone up, I think housing starts may exceed what you might expect, given the level of demand collapse we’ve seen in 2025,” he said.
By 2025, the largest public housing builders will struggle with shrinking margins, declining sales, higher compensation, tricky input cost trends, and lower revenues. The November BTIG/HomeSphere Homebuilder survey found that small and mid-sized builders reported similar difficulties, with lower traffic, lower sales, and increased incentives.
These methods undermine the self-confidence of home builders. In December, the NAHB/Wells Fargo Housing Market Index of homebuilder confidence rose slightly, but was down seven points year-over-year. After the index was released, NAHB Chief Economist Robert Dietz predicted a slight increase in new home construction through 2026.
“We continue to see demand-side weakness as a softening labor market and stretched consumer funds contribute to a difficult retail environment,” said NAHB Chief Economist Robert Dietz in a provided statement. “After a decline in single-family housing starts in 2025, the NAHB predicts a modest gain in 2026 as builders continue to report future sales conditions in a slightly positive environment.”
BTIG predicts positive order growth through 2026, but Gilbert calls consumer confidence a “wild card” to watch closely this year.
Community builders often cite weak consumer confidence as a key obstacle to demand, driven in part by a weakening labor market. US Bureau of Labor Statistics Data released Friday found that the US economy added just 50,000 jobs in December and 584,000 jobs in 2025, the slowest year for employment since 2020.
“We’ve seen job growth and unemployment go in the wrong direction,” said Gilbert. “And I think that has impacted demand over the last few months.”
