Home Construction Rebounds in March, but Worries Persist

Construction activity on single-family homes notched a swift uptick in March, as homebuilders experienced better weather.

The latest data from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development show total housing starts at a seasonally adjusted annual rate of 1.502 million for the month, up 10.8% from February. It's also up 10.8% from March 2025.

Single-family housing starts tracked an 9.7% uptick from the month prior, topping 1 million for the first time in more than a year and rising 8.9% from a year earlier. However, permits, which are a sign of future construction, declined on a monthly and annual basis.

"The strong starts figure suggests that builders are anticipating stronger buyer demand than what has been seen recently and are willing to work the projects in their pipeline, but the pullback in permitting shows that this optimism is balanced with some caution about the economic realities they face," says Realtor.com® senior economist Joel Berner.

"Builder margins are being squeezed by rising material costs that stem from today’s geopolitical uncertainty on top of the already-high costs of land and labor, so it’s unsurprising to see them exercising some caution about future projects," the economist adds.

The Census data, which is a few weeks delayed, reflects a pickup after the late January and early February series of chills and blizzards that left much of the country in a deep freeze. So they reverse a decline seen in the January housing starts, which fell 6.8% from the same time in 2025.

The West of the U.S. saw the sharpest uptick in new single-family units with an 18% improvement from the month prior, followed by the Northeast at 11%. The South saw an 8.5% increase and the Midwest a more modest 1.3%.

Year over year, the Midwest is the growth leader, with permits up 17.8% from March 2025. The West follows with an 11% bump, with the remaining parts of the country seeing 6% gains.

The number of housing units still under construction remained about the same, at about 1.26 million month-over-month.

This is also the first housing construction data to come after the United States entered hostilities with Iran beginning Feb. 28. Market indicators since then could spell trouble.

The number of new housing permits declined 10.8% compared to February, and also marked a 7.4% decline from the same time last year. That's 1.37 million permits in March 2026 compared to 1.54 million the month prior.

The West and Northwest saw the strongest declines in permits. Large multifamily construction of 5 or more units also saw a 23% decline. That market segment is generally more volatile, and its rate of decline was uneven nationwide.

"Though the strong starts figure makes for an encouraging headline, there is more to the story of new construction this month," says Berner. "Builders are being strategic, waiting to see how the Iran conflict plays out before requesting new permits and delivering finished homes in regions where their margins are currently higher."

Shaken confidence

The National Association of Home Builders tracked a marked decline in homebuilder sentiment in its latest NAHB/Wells Fargo Housing Market Index released earlier this month. Builders are concerned about continued economic uncertainty, a rise in building costs and interest rates.

The builders began the year with confidence but the Iran conflict shook that. Now, 62% of builders told NAHB that suppliers were increasing costs, because of fuel concerns. And 70% of builders reported challenges pricing homes.

Builders have shared that sentiment in earnings calls with analysts in recent weeks. Scottsdale-based Meritage Homes reported a 17% drop in home closing revenue in the first quarter.

Executive Chairman Steven Hilton says the Iran war's impact on interest rates, gas prices, and inflation chilled consumer confidence for that builder, which is concentrated in the South and West.

"While we still believe that long-term fundamentals for the home industry are strong, we also acknowledge that the current market conditions are causing potential homebuyers to hesitate," Hilton said on an April 23 call. "Capturing demand for the near-term will require higher-than-anticipated use of incentives."

Columbus-based M/I Homes CEO Robert Schottenstein says his company had spent the past year aiming to work out cost reductions with long-term contractors, but also said the builder hadn't yet seen costs baked in. M/I, which is more focused in the Midwest, reported a more modest 6% revenue decline.

"We continue to believe that long-term housing demand is supported by favorable demographic trends and an undersupply of housing," he says.