New Home Construction Slowed in 2025 for Third Straight Year

Seattle, WA, September 15, 2026—After a historic run, new home construction is slowing. A new Zillow analysis finds completion of detached single-family homes fell for the third straight year in 2025, and the pace of permitting is slipping further below its pre-pandemic trend line. The concern is that a thinner pipeline could deepen an already significant housing shortage at a time when affordability is already stretched thin.

Over the 12 months ending July 2026, more than 1.42 million residential building permits were issued nationwide, down 1.7% from the same period a year earlier. Compared with the pre-pandemic trajectory from 2016 through 2020, permitting is running 19.4% below where it would have been if that trend had held. Permitting has fallen year over year for 44 consecutive months and is now the furthest below the pre-pandemic trend line that it’s been this decade.

Bright spots are that builders are completing homes more quickly as the pandemic-era backlog clears, and favoring smaller homes that are more affordable for financially stretched buyers. The median detached home completed in 2025 took six months to build, a month faster than at the height of the supply-chain crunch in 2022 and 2023.

“Builders are responding to a softer market by pulling back, especially in the places they’d been building the most,” said Kara Ng, senior economist at Zillow.  “That’s an understandable reaction to today’s conditions, but the housing shortage that drove the building boom is still very much intact. The concern is that when conditions improve and buyers return, the thinner pipeline could mean a tighter market that drives up prices.”

The permitting pullback is concentrated in markets that led the pandemic-era boom, largely in the Sun Belt. Austin permitting fell 25.3% over the past year, the biggest drop among major markets. San Antonio dropped 24.1%, which was the second-largest decline. These markets have seen a surge in overall inventory, making it harder for builders to justify breaking new ground.

Permitting gains are happening mostly on the coasts and in the Midwest, where construction had been more subdued during the boom of the past few years. Permits more than doubled in San Jose (up 122%), with Seattle (35.8%), Birmingham (32.9%), Los Angeles (30.6%) and San Francisco (29.0%) also among the biggest gainers. In many of these markets, years of depressed construction mean even a modest uptick in new projects can produce a large swing. For context, the 34,696 permits in Los Angeles over the past year were barely half of what was seen in Dallas (61,275) and Houston (59,214).