new construction of single-family homes slowed considerably last month, as homebuilders contend with rising costs and muted buyer demand.
The pullback in single-family construction follows data showing that homebuilder sentiment remains low, with 60% of builders reporting that their suppliers have announced or imposed price increases on materials due to tariffs.
Builders estimate that President Donald Trump‘s recent tariff actions have raised their costs by about $10,900 per home. Steep interest rates have also raised their borrowing costs to finance construction, while weighing on buyer demand in the form of higher mortgage payments.
Mortgage rates averaged 6.65% in March, after briefly skirting just above 7% in January, according to Freddie Mac.
“The drop in March housing starts is a clear signal that affordability pressures are intensifying,” says Buddy Hughes, chairman of the National Association of Home Builders (NAHB).
Although a recent Realtor.com® analysis found that the nation has a housing supply gap of nearly 4 million homes, Hughes says homebuilders are struggling to deliver affordable starter homes.
The typical sales price for new homes sold in March was $414,500, a price point that is unaffordable to more than 70% of households, according to an NAHB analysis.
“Elevated mortgage rates and rising construction costs are making it increasingly difficult to deliver homes at price points accessible to entry-level buyers,” says Hughes. “We’re seeing demand soften as more potential homeowners are priced out of the market.”
Starts on single-family units, which account for the vast majority of all homebuilding, plunged 14.2% in March from the prior month, to a seasonally adjusted annual rate of 940,000, the U.S. Census Bureau reported Thursday.
The March figure was down 9.7% from a year earlier, and at the lowest level since June 2024. Multi-family housing starts fell just 3.5% on the month, but were up 48% from last year, when they hit a four-year low.
Building permits rise slightly from February
Although new-construction activity dropped sharply last month, total building permits rose slightly, driven by increases in multi-family authorizations.
Total housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,482,000—up 1.6% from February but down 0.2% from a year ago.
However, single-family permits were down 2% from March levels and also slightly below where they stood a year earlier.
“The healthy level of permit issuance indicates that the floor isn’t falling from underneath the residential construction sector just yet, although with mounting tariff concerns weighing on homebuilder confidence, we think there is further downside for housing starts to come,” says Harry Chambers, assistant economist with Capital Economics.
The latest survey of homebuilder confidence remained in negative territory, with more builders assessing the market as “poor” than “good.”
“With tariff-related uncertainty unlikely to fade anytime soon, and the likely imposition of lumber tariffs set to push up already-rising costs for homebuilders, this supports our view that groundbreaking will slow over the next couple of years,” says Chambers.
In February, the NAHB projected that single-family construction would grow just 0.2% this year, to an annual rate of 1.01 million units.
That would mark an anemic pace of growth and is likely not enough to make significant progress in closing the nation’s housing supply gap of nearly 4 million units.