New construction ends 2024 on a high note
Housing starts were way up for the year, and prospects look good heading into 2025 — but the economy and policy decisions could present some challenges.
Based on the latest census data, builders should be feeling good about their prospects in the new year. Permits and housing starts were up in December, an indication that more single-family homes could soon be under construction.
Despite the positive signs, there's still some uncertainty as builders wait to see what impact a new presidential administration has on the construction industry.
A December bump, and a strong year overall: Building permits were up 1.6% while housing starts for single-family homes rose 3.3% from November to December, according to a Jan. 17 report from the U.S. Census Bureau. Housing completions were down 7.4% for the same period.
Compared to Dec. 2023, however, single-family permits, starts and completions were all down, as was multifamily construction.
But looking at 2024 as a whole, it was a good year for housing construction. There were just over 1 million single-family starts in 2024 — the second-highest number since 2007, and a 6.5% increase over 2023. Single-family completions were up 2.2% for all of 2024 compared to 2023.
That's giving homebuyers more options, but work still needs to be done, said Odeta Kushi, deputy chief economist at First American.
"We need to increase the sheer amount of construction in this country to not only keep up with new demand every year, but also make up for the underbuilding that has now been occurring for decades," Kushi said.
Unclear what 2025 will bring: While off to a strong start, there are many wildcards that could affect the construction industry in 2025, said Lisa Sturtevant, chief economist at Bright MLS. Trump administration proposals to raise tariffs could increase the price of building materials, and a crackdown on immigration could create a labor shortage.
"There are uncertainties on the demand side, as well," Sturtevant noted. "Homebuilders have been optimistic that pent-up housing demand would be unleashed in 2025. However, with mortgage rates hovering persistently close to 7% and affordability a real challenge in the market, buyer traffic is going to be subdued during the first part of the year," she added.
Despite those potential headwinds, builder confidence edged up in January, according to the National Association of Home Builders. The index gained a point from December, landing at 47. That's up from a low of 39 in August, but it remains below levels achieved last spring when there was greater optimism about mortgage rates going down