Late-year gains in construction masked cautious bets on 2026 demand
Single‑family homebuilding in the United States picked up in December as builders leaned into slightly better affordability, even while permits and sentiment pointed to a cautious 2026 pipeline.
Total housing starts rose 6.2% in December to a 1.404 million seasonally adjusted annual rate, with single‑family starts up 4.1% to 981,000, according to government data released after a fall shutdown delay.
Building permits climbed 4.3% to 1.448 million, but single‑family authorizations slipped 1.7% to 881,000 – a reminder that builders were still probing demand rather than fully committing to new projects.
Builders finished 2025 on “firmer footing”
“The November and December housing data show construction ended 2025 on firmer footing,” First American deputy chief economist Odeta Kushi said.
“Single-family starts increased 4.1% in December to 981,000, the highest level since February 2025 and marking a third consecutive monthly gain, suggesting that late-year improvements in builder expectations were accompanied by modestly stronger groundbreaking activity.”
“Importantly, single-family permits are no longer consistently declining as they did through the first half of 2025. Instead, they appear to have stabilized in recent months,” she said.
For the full year, an estimated 1.36 million housing units were started in 2025, down just 0.6% from 2024, underscoring resilience in building activity despite elevated mortgage rates and higher costs.
Pipeline and sentiment still constrained
Kushi pointed out that December single‑family completions ran more than 10% above year‑ago levels, adding near‑term supply at a time when the market still faced a long‑running housing deficit. More completed homes, she said, helped narrow the supply gap and ease some price pressures, even if they fell short of resetting affordability.
Tariffs and still‑high materials costs kept builder confidence under pressure through much of 2025, even as some economists framed the current cycle as a moderation rather than a crash.
“Builder sentiment improved in November and December as mortgage rates eased and the forward-looking sales index remained above 50. However, the HMI has edged lower to start 2026, and affordability challenges, elevated construction and land costs, and macro uncertainty remain headwinds,” Kushi said.
According to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), confidence among builders of newly constructed single-family homes inched up just one point to 38 in November and another one point to 39 in December.
“In short, construction strengthened into year-end, but the housing market continued to navigate improving – yet still challenging – affordability conditions, while builders faced ongoing supply-side pressures.”
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