MW Builders hit the brakes on home construction as tariffs and weak demand weigh on sales

By Aarthi Swaminathan

Housing starts fell a lot further than expected as builders pulled back on construction of new single-family homes

The numbers: Construction of new homes fell 11.4% in March, as builders pulled back in the face of high interest rates and waning home-buying sentiment.

In March, housing starts fell to a 1.32 million annual pace from 1.49 million the previous month, the government said. That's how many houses would be built over an entire year if construction took place at the same rate in every month as it did in March.

New-home construction is still up 1.9% from the same period last year.

Builders slowed down construction of new homes due to a combination of factors. Higher costs of building materials due to the tariffs on imported goods imposed by the Trump administration, as well as persistently high interest rates and waning buyer sentiment, all influenced their decision to pull back on starting to build new homes in March.

And "given the craziness in the economy, we may not see another rebound, which might ordinarily have occurred, in April," Stephen Stanley, chief economist at Santander U.S., said in a note.

Building permits, a sign of future construction, rose 1.6% from the previous month to a 1.48 million rate.

Key details: Single-family construction fell 14.2% in March from the month before. Multifamily construction was unchanged.

The pace of construction was uneven across the U.S. New-home construction surged in the Midwest by 76.2%, but starts fell sharply in the West, by 31%.

Permits, which provide an indication of future home-building activity, were up overall in March. Permits applied for by builders to construct single-family homes fell by 2%, while permits to build multifamily homes rose by 10.1%.

"Builders appear to be pacing themselves amid subdued expectations for home sales in the next six months as well as a high degree of uncertainty regarding tariffs going forward," Ben Ayers, a senior economist at Nationwide, wrote in a note.

Builders are also pessimistic about sales in the next six months, so new-home construction could fall further in the short run, Ayers said.

Read more: Builders expect tariffs to increase costs by nearly $11,000, but they're slashing home prices. Here's why.

Big picture: America needs more homes, but builders aren't building them.

Builders are feeling the pressure on both ends of their business. Higher construction costs due to tariffs, higher financing costs due to interest rates and weakening buyer demand due to economic uncertainty and high mortgage rates are all making it very difficult for builders to operate.

"The 2025 spring selling season started slower than expected as potential homebuyers have been more cautious due to continued affordability constraints and declining consumer confidence," David Auld, executive chair of D.R. Horton, the nation's largest home builder, said in the company's second-quarter earnings release.

D.R. Horton $(DHI)$ missed revenue expectations and also reduced its outlook for the year due to weak demand.

-Aarthi Swaminathan

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April 17, 2025 10:24 ET (14:24 GMT)

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