As the new year sets in, will there be sufficient inventory to make 2025 a strong time for the real estate market? The latest report on new residential construction from the U.S. Census Bureau found housing starts increased at 2024’s end, but still lagged compared to 2023.
Specifically, during December 2024, privately-owned housing starts were at a seasonally adjusted annual rate of 1,499,000. This is 15.8% higher than November 2024, but 4.4% lower than December 2023. Building permits came in at 1,483,000, a slight drop-off both month-over-month (a 0.7% drop) and year-over-year (a 3.1% drop).
The National Association of Home Builders (NAHB) called December’s numbers an “up note” in a press release, characterizing the results as strong demand overcoming “several headwinds facing the industry, including high mortgage rates, elevated financing costs for builders and a lack of buildable lots.”
Looking forward, NAHB Chairman Carl Harris projected in the aforementioned release that “(t)he industry expects to see a slight gain for single-family homebuilding in 2025 because of a persistent housing shortage and ongoing solid economic conditions.”
NAHB Chief Economist Robert Dietz, though, noted a lag in new multifamily unit construction.
“In December, and on a three-month moving average basis, there were 1.7 apartments completing construction for every one apartment starting construction. Multifamily construction will stabilize later in 2025 as more deals pencil out, with the industry supported by a low national unemployment rate,” projected Dietz.
The latest report of homebuilder confidence from the NAHB showed optimism, with several citing expectations that the incoming Trump administration will bring regulatory relief. There are some concerns, though, that proposed tariffs could increase the price of building materials and increased immigration enforcement could reduce the construction labor pool.
In a statement, Bright MLS Chief Economist Dr. Lisa Sturtevant noted the political uncertainty surrounding the incoming administration’s new policies, as well as economic concerns that could cut into homebuyer demand.
“Strong economic growth has led to higher inflation and borrowing costs, which has also created challenges for builders. There are uncertainties on the demand side, as well. Homebuilders have been optimistic that pent-up housing demand would be unleashed in 2025,” said Sturtevant. Looking forward through 2025, Sturtevant projected that buyer traffic will be “subdued” due to ongoing affordability struggles and mortgage rates that have climbed back up to 7%.
“At the same time, builders are competing with rising existing-home inventories, and price cuts and concessions have become more common,” added Sturtevant.
Joel Berner, senior economist at Realtor.com®, alternatively suggested that “buyers who have been frustrated with the stock of existing homes for sale may find that new builds offer them more affordable options for brand-new homes.”
Berner also surveyed the year end results that, in comparing 2023 to 2024, permits dropped by 2.6% and starts dropped by 3.9%, but new housing competitions were up 12.4%. He believes this discrepancy can also be attributed to policy uncertainty as builders ready for a new administration.
“Builders…have worked hard in 2024 to finish projects and get new homes online, but are holding back from pushing new projects into the murky landscape of construction in 2025,” said Berner.
Regional breakdown of housing starts
Of the four major U.S. census regions, the Northeast has the lowest absolute number of new housing starts, but it also saw the largest seasonally-adjusted increase in starts. In December 2024, total starts came in at 157,000, a 40.2% month-over-month increase and a 22.7% annual increase. Single-family starts in the Northeast were at 64,000 in December 2024, 14.3% higher month-over-month and 8.5% higher annually.
Only the West, which reported 285,000 total starts in December 2024, saw a monthly drop in starts by 0.7%. Western starts also decreased noticeably by 26.2% compared to December 2023. Single-family starts in the West came in at 225,000, 7.1% higher month-over-month, but a year-over-year drop of 15.1%.
The South maintained the highest regional number of starts throughout 2024. In December 2024, the region reported 853,000 total starts—a 17.7% increase month-over-month, but only a 0.1% increase compared to December 2023. Single-family starts in the South (617,000) were substantively unchanged in December 2024 compared to the prior month, but 1.8% lower than in December 2023.
The Midwest reported solid gains at 204,000 housing starts, a 20% increase month-over-month, but only a 1% increase year-over-year. Conversely, single-family starts in the Midwest (coming in at 144,000) increased 8.3% month-over-month and even more so compared to December 2023 (14.3%).
Housing construction permits, region-to-region
Northeast permits hit 147,000 in December 2024, a 5% increase from November and a 14% increase from a year prior.
The South saw modest gains in permits month-over-month at 808,000 in December 2024. This is 1% higher than November, but 6.5% lower than in December 2023.
Conversely, Midwest permits (totaling 215,000) declined by 1.4% month-over-month, but increased 5.9% compared to December 2023. Despite that increase, the number of one-unit permits alone declined month-over-month in the Midwest by 2.3% and annually by 0.8%.
The West saw a 6.6% decline in permits month-over-month to 313,000 and a 6.3% drop year-over-year.
For the full U.S. Census Bureau new construction report, click here.
