Home building and other construction slowing down in 2025

While the stock market recovered from its April panic, we keep seeing evidence that real economy might have kept trending down. Among the latest data for this was a report from the Census Bureau this week showing that a significant decline in new homes being started.

There was a 9.8% drop in housing starts (annualized rate), ending up with the lowest non-COVID amount of starts in nearly 6 years. And the same report said May was also the first non-COVID month that had less than a (seasonally-adjusted) 1,400 annualized permits since the Summer of 2019.

You can see where the level of starts and permits blew up post-COVID as the Fed Funds interest rate stayed around 0%, and then has fallen back as interest rates went up, leading to a double-whammy of unaffordability where homes cost more, and it cost more to borrow for those homes.

The post-COVID growth in starts earlier led to a boost in houses being worked on and finished between 2022 and 2024, helping to reduce the inventory squeeze. But that’s now slowing down as well.

And residential construction’s decline in the last couple of years goes along with a general decline in overall construction spending that’s been going on over the last 12 months.

There hasn’t been many layoffs in the construction sector as a whole as of yet, but job growth has slowed to 40,000 in the last 6 months compared to 86,000 in the 6 months before then. And if construction spending and home-building numbers keeps declining, I don’t see how there won’t be job losses in the coming months.