Why housing construction can’t grow at current demand levels

The U.S. has too much supply of single-family homes and not enough demand. But why can’t housing starts grow when the White House says we are 10 million homes short?

I go back to the 1984 movie “Ghostbusters” and this quote from from Dan Aykroyd’s character: “Personally, I liked the university. They gave us money and facilities; we didn’t have to produce anything! You’ve never been out of college! You don’t know what it’s like out there! I’ve WORKED in the private sector. They expect results.”

Why am I talking about this? Because people still believe, as they did in the past decade, that if we build a massive supply of homes first, home sales will explode. Now, while some in government and non-business people on the internet think this way, the private sector doesn’t, because it runs businesses to make money. Also, the cost to build multifamily housing needs to make sense relative to rents and the cost of capital — otherwise, you’re a terrible businessperson and you’ll be out of business. As I often say about this subject …

The builders aren’t the March of Dimes!

Today’s housing starts story is the same as it has been for years; we aren’t going anywhere with housing construction. Back in June 2021, I wrote an article saying that this would be the case once mortgage rates rose and that people shouldn’t get too excited about a housing construction boom. 

Today, I will focus on the single-family sector, as it’s the biggest variable in total housing starts data for decades, according to U.S. Census Bureau data.

Housing starts

Privately-owned housing starts in April were at a seasonally adjusted annual rate of 1.465 million. This is 2.8% (±11%) below the revised March estimate of 1.507 million but 4.6% (±13.9 percent) above the April 2025 rate of 1.4 million. Single-family housing starts in April were at a rate of 930,000; this is 9% (±7.5%) below the revised March figure of 1.022 million.

What’s happening here is that builders have too many completed units left unsold as new home sales haven’t gone anywhere for years.

Now, new home sales are still at elevated levels compared to 2019, prior to the pandemic. They’re not crashing by any means, but they’re not really growing. Back in December 2024, I wrote that builders have a supply problem, meaning their completed units for sale had reached 120,000, which is too much for them to get confined about building many more homes.

Currently, the number of completed housing units for sale is 121,000. Below is a historical look at where this has been each year, in January, going back decades, to give you an idea of why I’m not a big construction growth guy at the moment.

Below is the new home sales data. As you can see, it hasn’t gone anywhere for years either — not really crashing, not really growing, basically stuck in neutral since 2019. If you take away the post-COVID bump and the low point in 2022, a very steady channel of sales emerges.

In the chart above, you can see why housing starts look the same — no real big dive in starts but no growth either. For sure, it’s off the peak rate of the post-COVID recovery cycle.

Below is the builders’ confidence data. The tilt toward smaller builders explains why this survey is still stuck near the COVID-era lows point. Smaller builders don’t have the profit margins of the publicly traded homebuilders. A reminder that mortgage rates have risen to yearly highs this week, so the increase in the previous report is a bit old and irrelevant to the current rate story.

With all I said above, you can see why the single-family construction data is showing no growth at all. Here’s a series of single-family construction data lines, and they don’t scream housing construction boom to me.

Conclusion

Not much is happening in housing construction, AI data construction is booming, and the remodeling business is holding up OK, but housing starts really haven’t gone anywhere because there is too much supply and not enough demand. And that, my friends, is how the private sector works.

On top of all the news above, the conflict in Iran has taken all rate cuts out of the discussion in 2026, and we are talking about hikes now. Sarah Wheeler and I talked about mortgage rates this morning, and hopefully the information here gives you a clear picture on why housing starts aren’t growing — and aren’t expected to — in 2026.