U.S. Single-Family Home Starts Bounce Back but Challenges Persist

The number of single-family homes under construction in the U.S. climbed 7.6% in August to a seasonally adjusted annual rate of 918,000 units — its highest level since March. This gain was 5.2% above August 2025 activity, which posted a rate of 872,000. However, while August was clearly positive for single-family starts, it remains part of a larger and uneven recovery.

While the level of single-family starts is up 7.6% in August to 918,000, for the year-to-date, single-family starts are down 4.7% compared with August 2025. Total starts for August are down 2.6% to 1.275 million, largely due to a sharp decline in multifamily starts which fell to 357,000 units for buildings with five or more units. These are the largest multifamily structures, typically apartments.

While an increase in single-family housing construction starts may occur, it is likely to occur in the face of continued difficulties in the industry including high mortgage rates and expensive construction financing, labor shortages and high cost materials, and affordability issues affecting demand for newly constructed homes on individuals.

Builder confidence declined to 32 in September based on seller traffic (24) down three points, buyer traffic (21) down two points and current sales conditions (38) down three points from the August reading of 35, according to the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). Two of the three components declined with tougher lending, higher materials and labor issues cited by respondents as reasons for slower sales.

Meanwhile, the rate for total permits for future construction dipped 2.7% from July to 1.394 million in August and the rate for single-family permits fell 1.8% to 754,000. However, the latter remains slightly above its year-ago figure of 748,000. All of this activity suggests builders are going through projects on a case-by-case basis.

Housing starts and permits are diverging across regions. The Northeast is up 10% year to date in starts of single-family homes and multi-family units. The Midwest is also rising marginally. But the South and West are declining in both starts and permits.

August’s strong construction numbers suggest that the housing market can kick into high gear when it gets the opportunity. However, the numbers on permits point to a cautious housing market feeling its way through uncertain economic times and higher construction costs.

What This Means for Your Portfolio:

1. Watch for regional growth differences. The Northeast is growing at a 10% rate for combined single-family and multifamily starts year-to-date through August while the Midwest is increasing marginally. The South and West are declining both in starts and in permits.
2. Follow monthly changes in builder confidence and in issuing of new permits, since they signal in advance to changes in home supply and pricing.
3. Focus on markets and projects that will attract price sensitive middle-income buyers. Also consider projects that offer innovative financing options to first time buyers.
4. Follow labor and materials prices, because they will directly affect how long it takes to build a house and how much it will cost when it’s done.

The Final Takeaway:

The housing market, for all its recent growth, remains a highly uneven environment. It’s going to be a long time before any investor can confidently conclude that the broad U.S. housing market is going up. Instead, they’ll need to identify pockets of the market where local fundamentals will trump the macroeconomic environment and propel prices higher.