Builder confidence is currently down to a reading of 43 in June of 2024, but housing starts are forecasted to pick up in 2025. Let's take a look at a handful of indicators painting the evolving story 2025 single family residential construction.
Single-Family Residential Builders Lack Confidence in 2024
Similar to last year, builder confidence as measured by NAHB’s Housing Market Index (HMI), had seen positive movement in the first half of 2024 - up from a seasonal low of 34 out of 100 in November 2023. but as of June 2024 confidence has been on the decline to 43 out of 100.
As a reminder, with this index, any measures above 50 indicate positive sentiments while measures under 50 indicate uncertainty and negative sentiments.
For context, builder confidence was 55 out of 100 in June of 2023. The uncertain interest rate environment and lack of confidence home buyers have right now has influenced builder confidence from what we saw last year at this same time.
Active New Single-Family Building Permitting and Housing Starts
According to data released by the U.S. Census Bureau and HUD, the seasonally adjusted rate of building permits as of May of 2024 was 1,386,000—949,000 of which are for single family residential construction. This is down 2.9% from the prior month - April 2024 - and down9.5% from last year - May 2023.
Permitting is a leading indicator to understand the supply of new homes that will be available in the next 8-12 months.
As of April 2024, the U.S. Census Bureau estimates that that 634,000 new single-family houses were sold at a median sale price of $433,500, while currently there are 480,000 houses for sale.
Total permits and starts are forecasted to increase each quarter as we head into 2025 according to analysis by The National Association of Realtors.
Current Attitudes of Builders
The psychology and emotions of home builders is equally, if not more, crucial than comprehending financial news and housing metrics. It's essential to delve into what drives builders, the reasons behind their sentiments, and how these emotions influence their actions.
It's important to note that builders are not homogeneous. Larger, more sophisticated builders or those involved in commercial projects operate differently compared to smaller builders. Their opportunities, communication methods, product preferences, and information requirements vary significantly. Therefore, understanding the specific type of builder you're engaging with is essential for tailoring your product and marketing strategies effectively.
Remodeling Contractor Confidence
Beyond just understanding builder sentiments, you should have a solid pulse on remodeling contractor sentiments as well.
That’s why each quarter, our team at The Farnsworth Group tracks business confidence among five trades: remodelers, exterior contractors, mechanical contractors, finish contractors and landscape contractors.
From the Q2 2024 study results, we see that while backlogs are holding and contractors are busy today, they are facing increased competition for jobs as homeowners bid projects to more contractors due to budget.
According to Harvard’s Joint Center for Housing Studies, “annual expenditures for improvements and repairs to owner-occupied homes are projected to decrease this year and into the first quarter of 2025, but at a moderating rate, as published in their Leading Indicator of Remodeling Activity (LIRA).
While 2024 home improvement spend will be down, JCHS expects that downturn to be modest and not last long given that spending continues to be near-record levels still.
Multi-Family Housing Starts Expected to Decline While Single-Family Housing Starts to Increase
As market conditions create a more restrictive borrowing environment coupled with large numbers of new units saturating the market, the incentive for continued investor driven multi-family unit development has been reduced.
According to data released by the U.S. Census Bureau and HUD, the seasonally adjusted multi-family permits (2+ units) were forecasted at 437,000 permits.
Permits issued for 2-4 unit multi-family projects decreased 1.8% from the month prior - April 2024 - and decreased 3.5% from the year prior - May 2023.
In May, permits issued for 5+ unit multi-family projects decreased 6.1% compared to April 2024, but decreased 31.4% compared to the year prior - May 2023.
This continues to make way for single family construction and remodeling to be more viable pursuits in 2024 and 2025.
Next Steps for Improving Your Brand’s Success in 2024 and Beyond
For industry insights on what this means specifically to your business and what to be paying attention to going forward regarding your customers, brand and products, simply schedule a consultation.
You can also download this year's Building Products Customer Guide below for a deeper look at builder's purchase behaviors and business sentiments.
