Two stories are at play between the single- and multi-family spaces, says NAHB AVP
Single-family housing starts are continuing to nosedive across the US, slipping by 7% last month compared with July and hitting their lowest seasonally adjusted annual rate for over two years.
Sluggish sales amid continuing affordability challenges for many buyers have dulled investor appetite for the space in a trend that shows little sign of shifting. But the multifamily sector, by contrast, is surging – buoyed by an unexpected jump in investor confidence this year and strong tenant demand.
CBRE research showed that 2025’s first quarter marked the strongest Q1 performance for the multifamily sector since 2000, with vacancy rates sliding below long-term norms and net absorption spiking.
That means the purchase and construction outlook is diverging sharply between those two sectors, according to National Association of Home Builders (NAHB) AVP, forecasting and analysis Danushka Nanayakkara-Skillington (pictured top).
“We’re seeing two stories in a way because the single-family market is struggling but the multifamily market seems to be rebounding from the weakness that it experienced last year,” she told Mortgage Professional America.
NAHB anticipates fewer than 950,000 single-family starts this year, about 7% lower than last year’s total, while multifamily starts are expected to jump by around 15% to a pace of just over 400,000 units.
“It’s like the stagnation in the single-family household formation is now being moved to the multifamily sector,” Nanayakkara-Skillington said, “because single-family is an extremely unaffordable sector for many younger households.”
Mortgage rates dip, but economic uncertainty remains
Stubborn mortgage rates throughout the year to date haven’t helped hopeful homebuyers. A recent dip in the average 30-year fixed-rate mortgage below 6.3% might convince some buyers that it’s a good time to move, but other factors including a shaky economy, continuing trade volatility and labor market cracks could keep others at bay.
This month, the Bureau of Labor Statistics (BLS) trimmed nonfarm payroll estimates by 911,000 jobs through March 2025, with job growth over the past year coming in more than 50% lower than 2024’s adjustment.
“[Lower rates] should help a little bit to bring in some people from the sidelines but when you think of the overall macro conditions too – the fact that the labor market is struggling a little bit as well – and the uncertainty stemming from more of the fiscal policy, that is also creating this hesitation for single-family home sales at this point,” Nanayakkara-Skillington said.
The multifamily sector is also an increasingly attractive option for Americans because rent increases have stabilized in that space, making it a more affordable option for those who are unable to buy.
Meanwhile, renters are benefiting from more choice. “We saw back in 2022 that we had the highest number of apartments started,” Nanayakkara-Skillington said. “In the last couple of years, we had about a million units under construction.
“Now, it has fallen to about 700,000. But we have a large number of apartments coming into the market at this point. So I think the affordability on the renter side is better than on the homeownership side.”
Rate cut offers some optimism for beleaguered single-family space
Builder confidence on the single-family housing market remains low. The NAHB/Wells Fargo Housing Market Index (HMI), which gauges overall builder sentiment towards market conditions on a scale of 0-100, remained unchanged between August and September at 32.
US homebuilders stayed cautious in September, with confidence stuck at 32 for the fifth month, data from the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index showed.https://t.co/NpJrU8vdwD
— Mortgage Professional America Magazine (@MPAMagazineUS) September 19, 2025
But Nanayakkara-Skillington said the Federal Reserve’s decision last week to cut its funds rate for the first time this year could act as a boost to homebuilders in the final quarter.
“That should decrease the long-term rates. And for the builders, the acquisition, development, and construction loans are hedged against the long-term rates,” she said. “So that will help builders.
“Mortgage rates should go down a little bit more in the next couple of weeks. We expect another cut at the December meeting as well, so I think at this point, things are actually looking pretty good in terms of the Fed rate cuts.”
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