Residential construction markets diverge

Single-family market

In the single-family residential market, high interest rates and affordability constraints continue to drag momentum.

The U.S. Census Bureau reported privately-owned housing starts fell 0.5% year-over-year in June to a seasonally adjusted annual rate of 1.32 million units.

More specifically, single-family starts declined 4.6% from May to a rate of 883,000 units, while permits also softened to 866,000 units.

Single-unit residential completions fell sharply by 15.5% year-over-year, indicating a decline in buildouts of homes that have already been permitted.

The South and Midwest experienced the steepest declines, though the South also had the farthest to fall. Single-unit homes in the South comprised more than half of the completions across the country.

Oddly, while June sales of completed houses in the South neared two-thirds of the U.S. total, it still equated to an annual decline of 4.4%, and the Midwest, the other region that posted the sharpest decline in completions, saw home sales climb by 9% over the same period.

Overall, on the sell-side of the market, new home sales across all regions edged higher by 0.6% to a 627,000-unit pace, one of the slowest rates since late 2023, while the number of houses listed for sale ended June 8.5% higher than last year.

Homebuilder sentiment remains gloomy.

The National Association of Homebuilders Association Homebuilders and Wells Fargo’s Housing Market Index (HMI), which gauges homebuilder sentiment, remained in negative territory.

Builder confidence for July registered at 33, up one point from June, but still well below the breakeven level of 50. This marks the 16th consecutive month of a pessimistic outlook.

According to NAHB, housing conditions in 2025 have weakened as persistently elevated financing costs continued to push many first-time buyers out of the market. In response, builders increased the frequency of price cuts, with 38% of survey respondents reporting reductions, up slightly from 37% in June, at an average discount of 5%.

Despite the discounts, prospective buyers have remained hesitant: The index tracking buyer traffic fell to a reading of 20, its lowest level since the end of 2022.

Again, regional variations were uneven and unlike the non-residential construction market, the residential market as it relates to the South exhibited conflicting trends.

The HMI’s three-month moving average varied from the ABI’s subnational breakdown. The Northeast edged higher by two points to a reading of 45, followed by 41 in the Midwest, and the Southern (30) and Western (25) U.S. comprised the back half of components that comprised the average.

Multi-family market

The multi-family residential market has emerged from a period of aggressive expansion into a more measured phase. While leasing demand remains active, the surge in project completions has begun to test the limits of absorption on a long-term basis, particularly in Sunbelt cities that saw a pandemic-era investment boom.

Following a surge in apartment construction starts in 2021-2022, developers have recently pulled back.

In Q2’25, Dallas, Phoenix, Charlotte, Atlanta, and Orlando each delivered more than 4,000 units, feeding into a national pipeline that remains elevated even as permitting and new starts are on the downslope, according to Cushman & Wakefield’s “Multi-family MarketBeat”.

After a period of moderation in 2024, multi-family permits rebounded in June 2025, rising 8.1% month-over-month in June 2025, reaching a seasonally adjusted annual rate of 478,000 – surpassing both May 2025 and June 2024 levels. Similarly, starts surged 30.6% month-over-month and 25.8% year-over-year, indicating a fresh wave of development commitments, despite broader concerns.

However, other indicators suggest this might be an acceleration running counter to more intermediate demand-side realities. Multi-family units under construction are down 19.6% compared to June 2024, marking the 11th month-to-month decline in 5+ unit buildings over the last year.

Completions saw an even steeper contraction, falling 40% annually and 21% sequentially.

The disconnect between permitting activity and units under construction underscores a key disparity in the market. Developers are still greenlighting projects, but face barriers in execution. Whether this is due to financing constraints, raw material inflation, or labor bottlenecks is difficult to determine.

While permits for buildings containing 5+ units is up, according to census data, Cushman & Wakefield noted that multi-family starts under construction (which likely includes a narrower pool of qualified properties than the Census Bureau) dropped below the 500,000-unit mark in the second quarter to their lowest levels since 2016.

Net absorption, the difference between units that gained occupancy and vacant units completed in the same period, improved quarter-over-quarter, suggesting demand is keeping pace with recent supply.

In other words, even as fewer units are under construction, more are being absorbed, which could reduce supply overhang. Once the current delivery wave is fully absorbed, the recent uptick in permitting and starts may signal a second wind for multi-family construction.

It presents a positive anomaly, a mismatch where demand remains strong enough to validate new project starts even in the face of broader headwinds.

Misaligned momentum

The latest data shows the residential building and construction market diverging along structural and financial lines.

Both sides of this sector are tied to aluminum demand for siding, fenestration/window products, and doors more so than the aluminum curtain walls of the non-residential sector.

Single-family builders remain largely sidelined by affordability hurdles and subdued buyer sentiment.

The multi-family market, on the other hand, points to a different kind of speculative assumption.

Multi-family construction is increasingly defined by a mismatch between developer intent and market reality. While permitting and starts have surged, the plummet in units under construction and backlog of unfinished projects hints at developers only just coming to a economic reckoning and running on an outdated momentum.

If that trend continues, supply overhang may delay the subsector’s ability to self-correct.