Homebuilders Hope Lower Mortgage Rates Will Lure Buyers as New Construction Falls

New-home construction permits ticked up in December 2025, after November numbers declined, according to the latest U.S. Census Bureau Monthly New Residential Construction report.

"2025 was a challenging year for builders, one in which they had to offer lucrative incentives and slash prices for buyers to get them engaged, and the weak demand for homes combined with rising costs of land, labor, and materials has led builders to pull back," says Joel Berner, senior economist at Realtor.com®.

Privately owned housing units authorized by building permits came in as follows:

• December 2025: 1,448,000
• November 2025: 1,388,000
• October 2025: 1,411,000

"Permits in December were down 2.2% year over year, but the downshift is not happening across the board," Berner explains. "It’s concentrated in the single-family home space, which fell by 10.9% year over year while multifamily construction actually picked up by 18.7%."

Realtor.com economists say home permits fell the hardest in the South (-10.9%), which is the region with the most new-construction activity. The Midwest fell by 5%, but the Northeast grew by 17.5% and the West by 13.5%.

“Single-family home building dipped in 2025 because of ongoing affordability challenges, fueled by high housing price-to-income ratios and elevated financing and construction costs,” says Buddy Hughes, a homebuilder and developer from Lexington, NC, and immediate past chairman of the board of the National Association of Home Builders. "NAHB expects single-family starts will move slightly higher this year, as mortgage rates are expected to moderate."

Mortgage interest rates for a 30-year fixed home loan decreased to 6.09% for the week ending Feb. 12, according to Freddie Mac. The rate is 0.02% lower than the prior week and significantly lower than the average rate of 6.87% during the same period in 2025.

Housing starts

The number of housing starts (in which ground is broken), which measures new privately owned residential construction projects (single-family homes, townhomes, and apartment units), came in higher in December.

Housing starts:

• December 2025: 1,404,000
• November 2025: 1,322,000
• October 2025: 1,272,000

Housing starts were similar to permits, with the South seeing a 16.1% year-over-year decrease. The Midwest fell by 13.2%, but the Northeast grew by 2.7% from the same time last year and the West increased by 19.7%. The strong showing out West is due to multifamily housing, with single-family home starts falling by 9.4% year over year.

"The national picture shows more strength in the multifamily segment as well, with just a 1% reduction in the number of units started in projects of five units or more compared to the 9% reduction in single-family units," says Berner.

Home completions

Privately owned housing completions in December 2025 came in a tick below the pace of the prior year.

Single-family housing completions:

• December 2025: 1,525,000
• November 2025: 1,490,000
• October 2025: 1,430,000

The December rate for units in buildings with five units or more was 483,000.

"The Northeast saw a major influx of multifamily homes come onto the market, as the overall completions figure grew by 56.1% year over year at the same time that single-family home completions fell by 30.3%," says Berner. "Completions grew in the Midwest (8.4%) and South (4.2%) as well, but fell by 29.1% in the West.

"Taken together, these results point to a slightly disappointing 2025 for builders, and a cautious start to 2026. Especially in the single-family home segment, builders are wary of being left with inventory they can’t sell as buyers face their own uncertainty and grapple with mortgage rates above 6%," Berner adds.

The U.S. Census Bureau's New Residential Construction data for November and December 2025 was delayed due to the government shutdown in October, which lasted a record 43 days.