TL:DR
New apartment construction rose at the end of the year but was still down slightly from the same period in 2024
HUD and the U.S. Census Bureau reported a monthly rise in multifamily housing starts in the latest residential construction report released Wednesday, which buoyed the overall level of new residential projects. The Feb. 18 report also contains initial housing project numbers for November, which had not previously been released.
Starts for buildings with five or more units increased 10.1% month over month in December — the highest level of 2025 — but dipped 1% year over year to a seasonally adjusted rate of 402,000. That number also represents an uptick from November’s 365,000 apartment starts.
Combined housing starts came in at a seasonally adjusted annual rate of 1.4 million in December. That’s a 6.2% increase from November — driven by strength in the West — and a 7.3% decrease compared to the same period last year. In November, they rose 3.9% from October.
Single-family home starts clocked in at 909,600 in 2025, down 7.4% YOY. Overall in 2025, an estimated 1.4 million housing units were started, ticking down 0.6% from 2024.
There was no real recovery in the housing market in 2025, according to Matthew Nestler, senior economist at financial services firm KPMG.
“Despite the uptick in starts and permits at year-end, builders continue to grapple with rising construction costs, tariff and economic uncertainty and hesitant buyers,” Nestler wrote on LinkedIn. “We expect residential investment to remain weak this year; falling interest rates in the back half will help stimulate the sector.”
Nestler also noted that January and February 2026 numbers could be weak due to unusually bad winter weather across the South, the country’s largest housing market.
In recent earnings calls, leaders of major REITs cited declining levels of apartment project deliveries and high absorption of existing units as a reason for optimism this year. They hope tighter supply will enable them to raise rents, although the economy and job environment remain major concerns.
Multifamily project completions did fall from the same period last year: Developers finished an annualized 483,000 apartments in buildings with five or more units, down 15.9% YOY but up 7.1% MOM.
There were 670,000 apartments in buildings with five or more units that were actively under construction in December, 12.9% fewer than the same period last year and down 2.3% from November.
My Thoughts 💭My Thoughts 💭
Short term improvement but housing is still very weak and it appears no relief is coming in 2026. I snicker at the REITs trying to raise rents but jobs and earnings are stagnant to going down thus the job market can keep rent inflation in check. The housing market is huge growth in this sector would be great for the American economy but it looks like 2026 will not bring that growth.
In California, there is definitely growing recognition of the need for more abundant housing and for cutting red tape, even among the progressives. I'm glad that things seem to be getting better on that front.
In Washington state, the YIMBY movement curiously spans left and right. It seems like the real dividing line is home-owners vs everyone else. And sadly, homeowners are a stronger political base (less likely to move, can bring more resources to bear).
In California, I'd imagine prop 13 strengthens this. Which is to say: I wouldn't hold your breath for a sudden flood of more abundant housing.
Yes, this housing issue doesn't sort out along your standard political lines.
And, it's even an interesting debate regarding political philosophy. A lot of the YIMBY movement is top-down (state level bureaucrats trying to coerce neighborhoods into allowing development they don't want.)
(But then, the neighborhood restrictions are neighbors trying to constrain what a parcel owner can do with his own land.)
So it's an interesting political football.