Talk about a head fake. After a surge in homebuilding in the final weeks of 2024, new data today shows a sharp pullback in activity.
Why it matters: Few sectors capture the story of the economy in recent years better than housing — Americans' frustration with high prices, elevated borrowing costs, CEO uncertainty, and a supply-demand mismatch (for goods and workers).
- Two new economic factors could be added to that list of long-running housing issues: President Trump's trade war and deportation policies.
"ncertainty over the scale and scope of tariffs has builders further concerned about costs," Robert Dietz, chief economist at the National Association of Homebuilders, said Tuesday alongside an index that showed dampened industry sentiment.
The intrigue: High housing costs — made worse by an upswing in mortgage rates — are keeping some would-be buyers sidelined. Trump's policies could have more inflationary consequences than not.
- Homebuilders rely heavily on immigrant workers, who could be difficult to find with a crackdown on immigration (though at least one top Fed official has pointed to immigration contributing to higher rents).
Data: Freddie Mac; Chart: Axios Visuals
The new data crushes any supply-side optimism from late last year.
- The pace of new home construction nationwide plunged by 10% last month, including a slowdown in single-family home construction (-8%) and apartment buildings (-11%), relative to December.
- Bad weather held down construction in January, while the strong pace of construction in the prior two months was a bounce back from a hurricane-related slowdown.
Zoom in: Breaking ground on new homes is a leading indicator of supply — a positive development for prospective homebuyers facing a years-long affordability crisis driven by a shortage of homes.
- "The overall housing market remains more than 3 million units short," RSM economist Joseph Brusuelas wrote in a recent client note.
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