New home construction sees significant slowdown in April

New residential construction in the United States experienced a marked downturn in April 2025. According to recent data released by the US Census Bureau and the Department of Housing and Urban Development, single-family housing starts declined by 12% compared to the same period in 2024. As housing starts remain a key barometer of economic health, this decrease signals mounting challenges in the residential construction sector.

Housing data reveals a sharp contraction in single-family home building

The April 2025 report showed that single-family home starts fell to a seasonally adjusted annual rate of approximately 860,000 units, down from just under 980,000 in April 2024. The decline represents one of the steepest year-over-year drops in recent quarters. Multifamily construction held steady, but overall housing starts dropped by 9.7% month over month.

Compared to the first quarter of 2025, April’s data suggests a deceleration in construction momentum, despite earlier optimism fueled by easing interest rates. The month’s figures underscore a cooling market rather than a cyclical dip.

Rising costs and economic uncertainty drag down builder sentiment

Several converging factors are contributing to the slowdown. Builders continue to face elevated material and labor costs. Despite some stabilization in the cost of lumber and steel, other essentials such as concrete, electrical components and insulation have risen sharply. Labor shortages also remain persistent, especially among electricians, plumbers and framing crews, delaying project timelines and increasing overhead.

Economic uncertainty further compounds the issue. With inflation still above target and mixed signals from the Federal Reserve regarding future interest rate moves, many developers are taking a cautious stance. According to the National Association of Home Builders, builder confidence dipped in April for the third consecutive month, reaching its lowest level since mid-2023.

Construction slowdown plays out unevenly across regions

The nationwide decline masks regional variation. In the South and Midwest, housing starts declined in double digits, aligning with broader affordability and supply chain constraints. Conversely, some metropolitan areas in the West, particularly in tech-driven cities, saw marginal gains supported by high-income migration and local incentives for new development.

In the Northeast, activity remained relatively stable, buoyed by stronger job growth in urban centers and a continued demand for multifamily housing options. However, most analysts agree that the overarching trend is one of contraction, not resilience.

Impacts on housing supply and broader economic outlook

A prolonged decline in new home construction could aggravate the already strained housing supply in many markets. With fewer new homes entering the pipeline, inventory remains tight, placing upward pressure on home prices. This environment challenges affordability, particularly for first-time buyers and middle-income households.

The construction industry also plays a significant role in the broader economy, supporting over 7 million jobs across the US. A slowdown in housing starts affects employment in not just construction but also in related industries like manufacturing, logistics and home furnishings. If the current trend persists, it could moderate GDP growth in the second half of 2025.

Looking forward, industry analysts anticipate modest recovery in the latter half of the year if borrowing costs decline and consumer confidence stabilizes. Builders may pivot to more affordable housing types or smaller projects that require less capital and shorter timelines.

Sources:
ABC Columbia