Housing Starts Remain Soft Ahead of Fed Meeting

Challenging affordability conditions continue to act as headwinds for the housing sector, but the industry could see lower interest rates in the near future with the Federal Reserve expected to cut short-term interest rates this afternoon.

Overall housing starts decreased 8.5% in August to a seasonally adjusted annual rate of 1.31 million units, according to a report from the U.S. Department of Housing and Urban Development and the U.S. Census Bureau.

The August reading of 1.31 million starts is the number of housing units builders would begin if development kept this pace for the next 12 months. Within this overall number, single-family starts decreased 7% to an 890,000 seasonally adjusted annual rate and are down 4.9% on a year-to-date basis. This was the lowest reading since July of 2024 for single-family home building. The multifamily sector, which includes apartment buildings and condos, decreased 11.7% to an annualized 417,000 pace.

“Housing affordability is hurting buyer traffic for builders, and as a result builders have slowed single-family home construction,” said Buddy Hughes, chairman of the National Association of Home Builders (NAHB) and a home builder and developer from Lexington, N.C.  “Nonetheless, our latest survey shows builders reported an increase for future market expectations as mortgage rates have posted a modest decline in recent weeks.”

“With the Fed expected to reduce the federal funds rate later today, this return to monetary policy easing will help the mortgage market indirectly and lead to lower interest rates for building and land development loans, which will help builders to boost housing production,” said NAHB Chief Economist Robert Dietz.

On a regional and year-to-date basis, combined single-family and multifamily starts were 8.3% higher in the Northeast, 15% higher in the Midwest, 3.5% lower in the South and 0.1% higher in the West.

Overall permits decreased 3.7% to a 1.31-million-unit annualized rate in August. Single-family permits decreased 2.2% to an 856,000-unit rate and are down 7% on a year-to-date basis. Multifamily permits decreased 6.4% to a 456,000 pace.

Looking at regional permit data on a year-to-date basis, permits were 16.3% lower in the Northeast, 6.2% higher in the Midwest, 5.6% lower in the South and 5.2% lower in the West.

The slowing of single-family housing starts during 2025 has had a measurable impact on the number of single-family homes under construction. As of August, there were 611,000 single-family homes under construction, down 4.8% from a year ago.

Due to declines for multifamily construction starts in 2024, the number of apartments under construction has fallen 20% to 706,000 units in August.