At the peak of the residential construction season, home builders are navigating a difficult affordability landscape. Economic momentum is slowing, the job market is cooling, and stubborn inflation is keeping the 30-year mortgage rate near 7.0%. For many buyers, that keeps monthly payments out of reach. Meanwhile, tariffs on imported materials and goods central to new construction are making it harder for builders to deliver entry-level homes at attainable prices.
No surprisingly, construction activity pulled back in July. Housing starts dropped 12.4% from the prior month to 1.24 million annualized units, driven by a double-digit decline in multifamily projects. Starts were 13.5% lower than a year ago, due to much lower construction in the single-family sector.
Completed homes, ready for sale, decreased 9.1% from the prior month, and were 16.8% below the levels from July 2025. The pace of completions was influenced by pullback in activity in all geographic regions except the West. Builders delivered fewer single-family and multifamily units to market. Permits were the only relatively brighter spot, rising 5.0% from June of this year and 3.1% from the same month in 2025, on account of applications for multifamily properties.
Current market conditions are also highlighted by the National Association of Home Builders’ monthly Housing Market Index (HMI), which is based on a survey of construction companies. The HMI synthesizes builder sentiment about current housing conditions and short-term outlook on a scale from 0 to 100, with a reading above 50 indicating that the majority of builders feel more confident. Conversely, lower readings point to lower optimism.
This month’s reading of the HMI was 35, a score well below the balanced threshold of 50. The HMI has been hovering in the 30s since May 2025, underscoring the ongoing challenges that builders see in the marketplace.
The housing market is increasingly split by price. Existing-home inventory is growing, but much of it remains priced near record highs, with the national median price reaching $434,100 in July. Sales of homes above $750,000 rose at double-digit rates during the month, while transactions below $250,000 declined.
For buyers squeezed by affordability, the $398,300 median price of a newly sold home may look comparatively attractive, especially when paired with the benefits of a warranty. The latest HMI survey also reinforces the trend, with 35% of builders indicating that they reduced prices in August, while 63% resorted to sales incentives, such as mortgage rate buydowns.
Builders are also seeing that rental housing remains a durable source of demand, particularly in markets with strong economies and continued job growth. Year-to-date construction figures show that the multifamily pipeline remains active, even as financing and affordability pressures weigh on the broader market. As the 21st Century ROAD to Housing Act moves toward implementation over the next year, it could help bring more affordable homes online across both multifamily communities and single-family build-to-rent neighborhoods.