According to HousingWire, housing starts took a turn for the worse in August, with overall construction declining and economists now forecasting negative growth stretching into 2027. The Census Bureau and HUD reported that total housing starts fell to an annual pace of 1.275 million units, down slightly from the previous year. What's particularly concerning is the steep drop in multifamily construction, which declined significantly, though single-family starts did rise modestly in the month itself. However, that monthly bump masks a troubling trend when you look at the bigger picture.
The real story here is that single-family construction is actually lagging behind last year's pace when you measure across the full year to date. Builders are moving cautiously because they're facing a perfect storm of challenges. Construction costs keep climbing, skilled labor remains hard to find, and buyers are hesitant because mortgages are still expensive and home prices haven't become more affordable. This is forcing builders to offer incentives and smaller homes just to move inventory, and it's clearly taking a toll on their confidence.
Housing completions have also slowed significantly, which means fewer homes are actually being finished and added to the market. Single-family completions dropped in August, and the total number of homes under construction fell year over year. This slowdown in delivery compounds the problem because it means relief from tight supply won't come anytime soon.
What economists are saying now is markedly different from what they predicted just months ago. Earlier forecasts expected housing starts to grow modestly in 2026 and 2027, but that was before mortgage rates stayed stubbornly high and construction costs continued rising. Several economists quoted by HousingWire now predict negative growth in housing starts through 2027, with some forecasting declines of several percentage points in the years ahead. The combination of elevated borrowing costs for builders and the need to buy down mortgage rates for most new home sales is squeezing margins and making it harder for builders to justify breaking ground.
What I am seeing locally in the Bay Area and East Bay reflects exactly what these national trends are telling us. Builders are being selective about new projects, buyers are stretched thin on affordability even at new construction, and the pipeline of future homes is tightening. If these forecasts hold true, we could be looking at genuinely constrained supply moving into the latter part of this decade, which will have real implications for everyone in our market trying to buy, sell, or build.
