January saw fewer single-family house starts due to high construction costs and limited affordability, according to the National Association of Home Builders (NAHB). However, according to a report from the U.S. Department of Housing and Urban Development (HUD) and the U.S. Census Bureau, overall housing starts rose 7.2% in January to a seasonally adjusted annual pace of 1.49 million units, driven by strong multifamily construction.
For the third consecutive month, housing starts have climbed, with multifamily construction accounting for the majority of the increase. The Northeast and the South had the biggest increases in multifamily starts. January saw a decline in single-family homebuilding, which started the year below 2025 levels. The significant reduction in permitting activity suggests that residential building will continue to decline in the upcoming year.
Key Findings:
- January saw a decrease in building permits to 1,376,000 (SAAR). That is 5.8% less than in January 2025 and 5.4% less than the updated December rate. In January, the number of single-family permits was 873,000. Compared to last year, this is 11.6% less.
- The U.S. Census Bureau reports that housing starts rose to 1,487,000 (SAAR) in January, up 9.5% from January 2025 and 7.2% from the revised December estimate.
- In January, single-family dwelling starts decreased to 935,000 (SAAR), which was 6.5% less than in January 2025 but around 2.8% less than the December projection.
“The single-family market has slowed as builders continue to deal with elevated construction costs while affordability conditions are a cause of concern for many potential home buyers,” said Bill Owens, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Worthington, Ohio. “Weather effects also likely depressed single-family construction in the Northeast, where single-family starts were down 33% from December 2025 and down more than 6% compared to January 2025 readings.”
In 2026, new home sales may still be impacted by growing competition from resale inventory. After a 17% increase in 2025 that slowed price growth, Zillow projects a 2.9% gain in resale inventory in 2026.
Over 90% of single-family homes start building within two months, and over half of all single-family homes start construction in the same month the permit is issued. Approximately 80% of multifamily housing developments start within two months, and about one-third start in the same month as permit authorization.
“An increase of just $1,000 in the cost of a home would price out 156,000 households from the market at today’s prices and interest rates,” said Robert Dietz, Chief Economist of NAHB, highlighting the pricing unpredictability brought forth by protracted disruptions from the ongoing military conflict with Iran. “More than half of Americans cannot afford a $300,000 home.”
Dietz added that “downpayments remain the key binding constraint on demand” from homebuyers.
Homebuilding Activity Hindering Single-Family Homebuyers
Combined single-family and multifamily starts were 47.4% higher in the Northeast, 10.8% lower in the Midwest, 11.4% higher in the South, and 7.5% lower in the West as compared to the prior month. In January, the annualized pace of permits fell by 5.4% to 1.38 million units. The pace of single-family permits dropped 0.9% to 873,000 units, the lowest level since August of last year. Permits for multifamilies fell 12% to a yearly rate of 503,000.
“While the uptick in new construction at the start of the year offers a modest boost of optimism, permitting activity is still below year-ago levels,” said Orphe Divounguy, Senior Economist at Zillow. “Single-family homebuilding activity remains weak. With home values expected to remain somewhat flat, the combination of higher costs and increased competition from resale inventory is keeping many builders on the sidelines.”
Permits were 9.6% lower in the Northeast, 9% higher in the Midwest, 3.5% lower in the South, and 15.7% higher in the West when comparing regional permit data to the prior month.
Due to a slowdown in the single-family house building industry, the number of single-family homes under construction dropped back to 582,000 in January, down 8.8% year-over-year. The number of flats under construction has returned to 686,000 units, a 10% decrease from January 2025, despite previous improvements for apartment development.
Bob Broeksmit, the President and CEO of the Mortgage Bankers Association (MBA), nevertheless voiced confidence on Thursday in the face of growing geopolitical unpredictability and the ensuing changes in mortgage rates. This week, the MBA revealed that since mid-February, the number of mortgage applications has increased for three weeks in a row, and the demand for purchases has finally increased.
“Despite ongoing geopolitical tensions and broader economic uncertainty, overall demand remains strong,” said Broeksmit in commentary shared with Scotsman Guide. “Applications to both refinance and buy a home are running far above year-ago levels.”
