Builders who were relieved by an upswing in homebuilding in 2024, with a 6.6% increase in single-family starts, are confronting a different reality in the first six months of 2025, according to a new Zillow report, and the mood is less optimistic.
The number of single-family home permits issued has slumped by 6.3% to date, though it remains 16% above pre-pandemic levels. The sharpest falls occurred in Jacksonville, San Antonio, Boston, Denver and St. Louis.
While more than half of the 50 largest metros are still issuing more permits than before the pandemic, the report found sentiment is weakening. The most active single-family permit issuers are Kansas City, Orlando, Cincinnati, Pittsburgh and Oklahoma City.
A notable trend last year was a 10.7% jump in condo and townhome construction at twice the growth rate of detached homes – a trend that has continued in the first half of 2025.
To add to the challenges for builders, the inventory of existing homes in the U.S. is now at a six-year high, forcing builders to provide more incentives and reduce prices as buyers gain a little leverage. Nevertheless, affordability keeps a lid on new home sales volume, though builders have been active in building more affordable and dense housing types, including by reducing the average size of new single-family homes to 2,100 square feet and lot size to 6,300 square feet.
A separate Zillow report identified 627,000 new single-family home sales in June this year, 6% below the June 2024 estimate, with a median price of $401,800, down 2% year-over-year. New homes for sale outpaced actual sales, even though 37% of builders dropped their prices.
“Persistent underbuilding in expensive markets continues to erode affordability, Metro areas with high price-to-income ratios, such as San Jose, Los Angeles, and San Francisco, consistently permit fewer homes per capita than other regions,” the latest report commented.
“In the past 12 months, metros with price-to-income ratios one standard deviation above the national average issued less than half as many permits per capita on average as their peers, locking in long-term affordability challenges.”
Zoning and permitting policies restrict the addition of new housing in many cities and structural reforms are needed, Zillow stated. Such reforms include higher-density zoning, relaxed parking mandates, streamlined approvals and expanded trust funds to support affordable development.
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