Single-family housing starts rose in August but are down for the year and are expected to weaken even further, as homebuilders slow production in the face of higher construction costs and hesitant consumer demand.
While total new residential construction fell 2.6% in August, this monthly decline came amid a steep 21.7% pullback in multifamily starts, according to data released Thursday by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD).
Housing starts, when accounting for both single-family and multifamily, slipped to a seasonally adjusted annual rate of 1.275 million units, 1.2% below the August 2025 rate of 1.291 million units.
On the other hand, the seasonally adjusted annual rate of single-family starts in August grew 7.6% to 918,000. At first glance, this monthly growth may seem to signal strength, but single-family starts between January and August were 4.9% below the rate experienced during the same period in 2025, reflecting a slowing construction pipeline.
“Single-family construction showed some life in August, but builders aren’t stepping on the gas just yet. New-home inventory remains elevated, affordability is still keeping buyers on the sidelines and incentives are doing much of the work to generate sales. Until demand strengthens more convincingly, builders will continue to manage the construction pipeline cautiously,” First American Chief Economist Mark Fleming said in a statement.
Zillow Senior Economist Kenny Lee also pointed to the challenging conditions facing homebuilders, which have kept construction levels subdued through the first eight months of the year.
“While homebuilders have been adapting to the softer market by offering concessions and building smaller homes, mortgage rates are widely expected to stay elevated through the remainder of this year, and concerns over rising material costs and ongoing skilled labor shortages have been dampening homebuilder sentiment,” Lee said.
Completions, which add immediate supply to the for-sale and rental markets, also fell. Single-family completions declined to an annual rate of 816,000, down 10.4% from 911,000 in July. Total housing completions declined 11.9% from July, to a seasonally adjusted annual rate of 1.128 million units.
That is 27.1% below the August 2025 rate of 1.548 million units, underscoring how much builders have slowed the pace at which homes are being delivered.
The total number of housing units under construction also fell 3.2% year over year,inlcuding a 3.4$ year-over-year decline in single-family homes under construction.
Housing starts could be negative through 2027
In February, the National Association of Home Builders (NAHB) forecasted that housing starts would inch up 1% in 2026. At the time, NAHB also expected that mortgage rates would track down below 6.0% consistently in 2027, which would ignite pent-up demand in the market and lead to 5% growth in housing starts next year.
Only weeks later, the war in Iran broke out, driving a spike in mortgage rates and deterioration in consumer confidence, trends that have persisted in the months since.
Now, some economists predict that housing starts will be negative for the foreseeable future.
For example, Michael Guckes, Chief Economist at ConstructConnect, predicts that single-family starts will drop 5.9% for 2026 as a whole.
Selma Hepp, Cotality Chief Economist, now forecasts a 2% drop in starts in 2026, and a 4% decline in 2027, marking a reversal from earlier forecasts that predicted positive construction activity.
In a statement, Hepp noted a “perfect storm” of factors impacting homebuilders, including rising costs, including their own borrowing costs, and labor shortages.
“While builders are currently weathering these storms, margins are shrinking, and a high percentage of new home sales (80-90%) now require mortgage rate buy-downs,” Hepp said when explaining the revised forecast.
U.S. Bank’s September 2026 Economic Outlook maintained a slightly more optimistic but still subdued forecast. Their outlook predicts that housing starts will hold at 1.36 million in 2026, before edging down very slightly to 1.35 million in both 2027 and 2028.