US Housing Starts Slip 9.8% as Builders Pull Back
US housing starts fell 9.8% in January to 1.37M units as rising costs, high mortgage rates, and tariffs pressured builders.
Jordan B.
February 20, 2025
Together with
Good morning. The housing market just hit the brakes—hard. January’s housing starts plunged 9.8% as builders pulled back, spooked by rising mortgage rates, tariff uncertainty, and a growing pile of unsold homes.
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Market Snapshot
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*Data as of 02/19/2024 market close.
HOUSING MARKET
US Housing Starts Fall 9.8% as Builders Pull Back
US housing starts fell 9.8% in January, giving back December’s surge as builders hit the brakes amid rising costs, mortgage rates, and tariffs.
What’s happening: Housing starts dropped to an annualized pace of 1.37M units, per the Census Bureau. Single-family starts fell 8.4% to 993K units—the first decline since October—while multifamily starts plunged 13.5% to 373K units. Harsh winter weather, oversupply concerns, and financing challenges drove the pullback.
Builder confidence slips: The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) dropped five points to 42 in February, marking its lowest level in five months. The index component measuring sales expectations for the next six months saw a dramatic 13-point decline—the largest monthly drop since the pandemic.
Source: NAHB
Pricier and dicier: Builders are feeling the squeeze from many different directions. Mortgage rates are hovering near 7%, making affordability a nice idea. Meanwhile, Trump’s proposed 25% duties on Canadian and Mexican lumber, plus an existing 10% tariff on Chinese goods, isn’t helping with construction costs.
Too much inventory: New home supply hit its highest level since December 2007. To move inventory, builders like PulteGroup (PHM) are adjusting spec home prices and offering mortgage rate buydowns. Housing starts fell across the South, Midwest, and Northeast, while the West saw gains thanks to milder weather.
➥ THE TAKEAWAY
Why build it if no one comes? While housing starts could bounce back as weather improves, economists expect sluggish growth in 2024. High mortgage rates, elevated costs, and abundant inventory are keeping builders cautious. Construction will remain muted unless mortgage rates ease.
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✍️ Editor’s Picks
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Hospital conversions: US cities are turning shuttered hospitals into housing, fueled by prime locations, adaptable layouts, and $225M in federal historic tax credits for redevelopment projects.
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Land and expand: ISS is expanding US facilities management operations, targeting integrated services as rising return-to-office trends drive demand for workplace experience improvements.
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Build your brand: Maximize LinkedIn’s potential for your business. Learn how to establish authority, connect with key players, and turn your network into valuable leads.
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Activist investor: Bill Ackman’s Pershing Square invested $900M to increase its Howard Hughes (HHH) stake to 48%, with Ackman set to become CEO and chairman.
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Rule revision: Lowering bank leverage requirements could free capital for 10-year Treasury purchases, boosting demand, driving down yields, and easing borrowing costs for businesses and the government.
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Revoking approval: The Trump administration moved to revoke federal approval for Manhattan’s congestion pricing program, dealing a blow to Gov. Kathy Hochul’s tolling initiative.
🏘️ MULTIFAMILY
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Rising rents: Northeast PA’s multifamily market is seeing higher rents but also higher vacancies, with slow sales expected due to limited portfolios and slower employment and population growth.
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Condo financing: SK Development and CB Developers secured $158M from TYKO Capital for an 83-unit Turtle Bay condo project at 401 East 51st Street, set for fall 2027 delivery.
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Canceled tower: Stonelake Capital Partners scrapped plans for a 37-story Austin apartment tower amid market oversaturation and listed the East Fifth and Red River site for sale.
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Fontana complex: Golden Management acquired the 56-unit Mango Tree apartment complex near LA for $10.85M in an all-cash deal that closed in just 14 days.
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Dallas deal: Knightvest Capital acquired SKYE of Turtle Creek, a 331-unit Dallas community, rebranding it as Remi and planning extensive value-add renovations.
🏭 Industrial
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Changing of the guard: Prologis (PLD) CEO Hamid Moghadam will retire Jan. 1, 2026, after 40+ years, with current president Dan Letter set to succeed him as CEO.
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Conversions complete: Two office-to-industrial redevelopments have been completed in Santa Ana, part of 3M SF of planned office-to-industrial conversions in Orange County, per JLL.
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Leading the nation: Phoenix remains the top US industrial market, driven by strong manufacturing and logistics, despite a slowing pipeline and rising vacancies, per CommercialEdge.
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Funds raised: American Real Estate Partners (AREP) raised $309M for its Strategic Opportunity Fund IV, targeting data centers through its PowerHouse platform and high-demand residential projects.
🏬 RETAIL
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Investment surge: Retail investment hit $36.8B in 2024, up 6% YoY, with JLL predicting further growth in 2025, driven by rate cuts, low supply, and high-value transactions.
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Pharmacy closures: Independent and chain pharmacy closures are accelerating, leaving landlords with vacant retail spaces often repurposed for tenants like Dollar Tree, clinics, and car washes.
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Store conversions: Kirkland's plans to close or convert underperforming stores into Bed Bath & Beyond or Buy Buy Baby locations through its partnership with Beyond.
🏢 OFFICE
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Back in business: Amazon's (AMZN) return-to-office mandate has driven downtown Seattle foot traffic to its 2nd-highest post-2019 level, with weekday worker counts at 74% of 2019 norms.
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Losses widen: JBG Smith reported a $60M Q4 loss amid falling occupancy, rising debt, and federal workforce cuts, prompting asset sales and an $840M stock buyback plan.
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Hitting the market: Ohio’s State Teachers Retirement System listed 590 Madison Avenue for over $1B, testing Manhattan's trophy office market with its first potential 10-figure sale since 2022.
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Boosted leasing: Irvine Co. increased office leasing by 17% in 2024 after $538M in renovations, with upgraded properties reaching 90% occupancy as tenants prioritize modern spaces.
🏨 HOSPITALITY
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Unique experiences: Austin-based New Waterloo opened two boutique hotels—the Albert Hotel in Fredericksburg, TX, and the Fidelity Hotel in Cleveland, OH—that focus on unique, locally inspired guest experiences.
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*Disclosure: This is a paid advertisement. Please read the disclosure at the bottom of the newsletter.
📈 CHART OF THE DAY
Dallas-Fort Worth led self-storage deliveries in 2024 with 2.56M SF, followed by Atlanta and Orlando, as construction starts declined across most major metros, per Yardi Matrix data.
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