New-Home Market Sees a Slow Down

Construction activity in the single-family detached home market has declined over the past few years, with builders instead turning their focus to smaller homes that take less time to build

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 are responding to a softer market by pulling back, especially in the places they'd been building the most. That's an understandable reaction to today's conditions, but the housing shortage that drove the building boom is still very much intact.

- Kara Ng, senior economist at Zillow

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%.

About the Author

Catherine Sweeney, Content Strategist/Staff Writer

Catherine Sweeney, Content Strategist/Staff Writer

Catherine Sweeney is a content strategist and staff writer for Pro Builder and Custom Builder Online, with a focus on design trends, new products, and environmental issues. Contact her at csweeney@endeavorb2b.com.

Sign up for our eNewsletters
Get the latest news and updates