Residential Building Contractors NAICS 2361

Jul 16, 2025 - New Single-Family Home Sales Plummet

• New single-family home sales fell 13.7% month-over-month and were down 6.3% year-over-year in May 2025, according to the US Census Bureau. May’s total new home sales reached 623,000 units. According to Dow Jones estimates, Wall Street analysts had expected May sales to reach 695,000. In recent quarterly reports, some homebuilders said high interest rates and weaker consumer confidence weighed on demand. As sales of new homes remain soft, inventories of unsold homes are increasing. At the end of May, there were 507,000 new homes for sale, up 15% compared to May 2024. The number of unsold new homes in May was the highest since the summer of 2022, after the Federal Reserve began increasing interest rates.
• North American single-family construction and engineering spending in 2025 is expected to grow by 1% after increasing an estimated 2% in 2024, according to FMI’s third-quarter 2025 North American Engineering and Construction Outlook. FMI projects that 30-year mortgage rates will stay between 6% and 7% through 2026, impacting affordability. A recent jump in new apartment supply and unfavorable cost conditions will reduce multifamily spending by 9% in 2025, but the widening cost gap between renting and buying a home supports the multifamily market in the long term. The aging of the US housing stock and high home values drive demand for residential improvement spending, but high interest rates and elevated materials and labor costs will limit home improvement spending to 1% growth in 2025.

• High home prices and mortgage rates have priced many would-be homebuyers out of the market, creating robust pent-up demand that’s unlikely to be realized in the near term, according to The Wall Street Journal. In 2024, there were about 1.1 million first-time buyers, compared to an annual average of about 2.1 million over the last 20 years, according to the National Association of Realtors (NAR). To afford a median-priced new home today, a buyer would need an income of $127,000 compared to $79,000 for the same home in 2021, according to Harvard’s Joint Center for Housing Studies. To attract younger, first-time buyers, large builders with finance arms have offered mortgage-rate buydowns and discounts, which eat into profits. Industry watchers suggest that many first-time buyers may remain stuck on the sidelines, absent a significant drop in mortgage rates or a recession that pushes down home values.
• Apartment construction is increasingly shifting away from dense urban centers toward less populated and more affordable regions, according to the NAHB’s Q1 2025 Home Building Geography Index and reporting by Smart Cities Dive. Since 2016, large metro core counties have seen a 9.6 percentage-point drop in market share for apartment starts, hitting a low of 35.5%. The trend is fueled by affordability concerns, demographic shifts—especially the rise of older renters seeking suburban lifestyles—and project owners favoring lower-cost developments in exurbs and rural areas. Developers are pursuing projects farther out where land is cheaper and expansion is easier, though total activity in these areas remains relatively small.