As the U.S. faces an ongoing housing shortage, completions of detached single-family homes fell for the third straight year in 2025, and construction activity in 2026 is trending the same way. A recent report from housing marketing platform Zillow shows that over the 12 months ending July 2026, more than 1.42 million home permits were issued nationwide, which is a decrease from the 1.7% a year earlier.

Builders turn their focus to smaller homes that can be constructed quicker

In an effort to increase the pace of new construction and sales, builders are leaning on certain types of housing more than others. Builders are completing homes more quickly as the pandemic-era backlog clears, and favoring smaller homes that are more affordable for financially stretched buyers.

In 2025, the median newly completed detached home measured 2,300 square feet compared with 2,400 square feet in 2019. Lots have shrunk as well, measuring a median of 8,700 square feet in 2025 compared with 9,000 in 2019.

Some areas are still seeing a high share of new-home construction

Increased permitting activity is happening mostly on the coasts and in the Midwest, where construction was slower during the pandemic-era housing boom. For instance, permits more than doubled in San Jose, Calif. There, permits were up by 122%, followed by Seattle at 35.8%), Birmingham, Ala., at 32.9%, Los Angeles at 30.6%, and San Francisco at 29%.