Construction activity continues to slide as homebuilder mood sours

New-home sales have been powering an otherwise dismal housing market, but macroeconomic headwinds are prompting homebuilders to pull back.

According to the May 2025 new construction report from the U.S. Census Bureau, single-family construction continues to slide in the aftermath of President Donald Trump’s tariff announcement in April, which compounds problems related to a preexisting shortage of labor.

Single-family permits (-6.4%), starts (-7.3%) and homes under construction (-7.6%) all fell year over year. Completions edged up slightly by 0.1%. The numbers for permits and starts are at five-year lows.

“With tariffs raising materials costs and immigration policy likely worsening labor shortages, the supply side of the equation is difficult and coupled with an environment where demand for new construction homes is weakening as the number of existing homes for sale grows,” Realtor.com chief economist Danielle Hale said in a statement.

Regionally, the South is dragging down national numbers, as markets in Texas and Florida continue to sputter. Single-family permits (-9%), starts (-10.4%), homes under construction (-8.4%) and completions (-8%) are all down substantially in the South compared to the same time year.

The mood among homebuilders is dour. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) in June dropped to a reading of 32, its lowest mark since December 2022 and in line with numbers from April 2020 and June 2012.

Hesitant buyers and impatient sellers have led to a national spike in inventory of about 30% year over year. The added options have forced builders to increasingly cut prices and offer incentives, which often take the form of rate buydowns.

“Builders face higher financing costs, tariff uncertainty, softer demand from elevated rates, increased competition from rising existing-home inventory in key markets like Texas and Florida, and higher inventories of their own,” First American deputy chief economist Odeta Kushi said in a statement. “This mix is weighing on builder sentiment and likely to slow single-family construction.”