Housing starts were down at the beginning of 2025. According to real estate marketing platform Zillow, housing starts fell in January by 9.8% to an annual rate of 1.36 million. On a year-over-year basis, starts also dropped by 0.7%. Despite higher mortgage rates compared with last year, builders are adjusting to the long-term rate environment, suggesting that weather could be partially to blame for the slowdown. However, ongoing uncertainty in the housing market will likely persist over the next several months, and this could continue to have an impact on new-home construction.
Historically, rising housing inventory has been linked with an increase in the measure of home buyers. However, rising uncertainty over the new administration’s tariffs agenda could cause interest rates to remain elevated while also pushing many builders to the sidelines due to higher costs for building materials and components. In January, the National Association of Home Builders estimated that new tariffs on Canada and Mexico could raise construction costs.
If housing starts continue to decline, new available housing – for-sale or for-rent – could peak this year well short of expectations, setting the stage for a potential rebound in multifamily valuations and stronger home price growth heading into 2026. Read more