April 2025 New Residential Construction

What happened

New residential construction activity slid in April, the first indication of the effects of the current trade war on homebuilding. Permits fell by 4.7% month over month and 3.2% year over year. Starts picked up a bit from a slower March (+1.6%) but are 1.7% below April 2024. Completions were down the most, -5.9% month over month and 12.3% year over year, but this might have less to do with tariffs (which we would expect to affect the more forward-looking metrics) and more to do with the fact that completions have consistently trailed permits and starts for the past year and there were fewer homes in the final stages of construction than usual. Many builders, like many retailers with their inventory, have been stockpiling materials in advance of tariffs being implemented, which might explain why housing starts were less affected than permits. The United States is missing nearly 4 million homes due to decades of underbuilding, and this month’s new-construction data shows that the administration’s trade policies will only make the supply gap worse.

Where it happened

Single-family home construction was hit harder than multifamily, likely because rising costs of construction due to tariffs compress profit margins, and bigger projects have more room for error. This could also be in response to market conditions. Rents nationwide have been falling on a year over year basis for 21 consecutive months, so builders might anticipate some more ability to pass along tariff costs to renters than buyers of single-family homes. In any case, multifamily permits grew by 2.6% year over year while single-family permits fell by 6.2%. Multifamily starts grew by 28.8% year over year while single-family starts fell by 12%, and multifamily completions fell by just 1.7% compared with single-family completions falling by 16.6%.

Focusing on permits to isolate the most direct impact from tariffs, we see the most significant pullback regionally happening in the South, which is home to many of the more affordable new homes in the country and also the highest overall level of new construction. Permitting in the South fell by 9.6% month over month and 9.8% year over year. We’ve shown that the new-construction premium (the percentage difference in price between newly built and existing homes) is lower in the South, so again, it seems that builders are responding to increased costs by deprioritizing lower-margin projects. The bright spot for permitting is in the 2-to-4-family project space, structures like duplexes and townhomes, which were up by 1.7% month over month and 5.4% year over year. We know that builders are trying to build smaller and more affordable inventory to supply some missing price ranges of inventory, and though they’re starting to eschew some lower-priced single-family homes, they are at least able to continue prioritizing this important segment.

What does this mean for homebuyers, sellers, homeowners, and the housing market

The trade war is bad for housing, and we have already seen it subdue buyers by causing anxiety about job loss and personal financial situations. What we’re seeing now are the more concrete supply-side effects: fewer and less affordable newly built homes under construction. The cost of owning a home and the income required to do so have skyrocketed since the COVID-19 pandemic, and tariffs will continue to put this part of the American dream even further out of reach for millions.