The single-family (SF) housing market is navigating a tempered path in 2026, marked by downward-trending start forecasts, declining permits, and shifting consumer behaviors.

Halfway through the year, builders, economists, and industry analysts are recalibrating expectations amid elevated borrowing costs, constrained mobility, low affordability, and the continued strength of the multi-family (MF) segment. The construction of data centers is also contributing a unique opportunity in the industry for some stakeholders, as it perceivably offers more value than SF homes.  

However, unless heavily invested in MF housing or integral to data center construction, the repair and remodeling sector shows the strongest opportunities for manufacturers and suppliers.

What is the Current State of Single-Family Residential Construction?

Halfway through the year, the outlook for SF residential construction in the U.S. shows continual year-over-year (YoY) decline. The most notable indicator is the ongoing decrease of permits, which is a leading indicator to understand the supply of new homes that will be available in the next eight to 12 months. Starts are also down YoY, with roughly 941,000 SF homes started in 2025 compared to a forecast of 940,000 in 2026, according to data from the National Association of Home Builders (NAHB) and the Federal Reserve Bank of St. Louis (FRED), included in The Farnsworth Group’s Construction and Remodeling: Industry Drivers and Forecast Report.

Although improving, the existing home supply remains low at an approximately 4.6-month supply (a six months’ supply should be on hand for a healthy market). Meanwhile, there was an approximate 10.3-month supply of new homes as of July 2026. With new home inventory above balanced levels, the result is a decrease in median new home prices and deferring new SF starts.

What is the Outlook for Single-Family Construction in the U.S.?

Demand for SF housing is present but being constrained by affordability pressures, particularly for first-time home buyers. Higher mortgage rates and home prices limit buying power, though underlying interest in homeownership remains solid. Additionally, SF builders are feeling the near-term squeeze of tighter margins and smaller-scale projects following a down year.

As rates reached new highs in the past 12 months, and the selling season begins its annual decline, delayed home buying and pressure on homebuilders is expected to continue. Looking ahead, SF starts are projected to once again be down YoY in 2026 and then experience a mild rebound into 2027, with expectations that financing conditions will gradually improve.

What Factors are Impacting Single Family Housing Construction Right Now?

The outlook for SF construction in the U.S. is influenced by a variety of economic factors, as well as general housing trends. Here is a brief overview of some of the variables shaping the future for SF housing:

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1. Mortgage Rates

Both 30-year fixed-rate mortgages and the annual average Federal Reserve prime loan rate are still elevated at roughly 6.66% and 6.75%, respectively, according to data from FRED. High rates reduce mobility and contribute to lower home prices and lower affordability metrics. For the more than 50% of mortgaged homeowners who are locked in below 4%, moving would mean giving up their current rate for a less desirable one. Not to mention their options or limited with low existing home inventory.  This is perpetuating a long-term lock-in effect in the market, with many homeowners waiting to move until rates improve.  As the average time in the home moves closer to 10 years, homes continue to age, and equity is strong, this provides more upside for remodeling activity than new home construction for the remainder of the year and into 2027.

2. Labor Shortages

Labor shortages are structural and worsening across key trades, based on data from the U.S. Census Bureau, included in the Construction and Remodeling: Industry Drivers and Forecast Report. Overall participation has steadily declined in recent decades, reducing the number of people available in the workforce. After falling dramatically due to the pandemic, participation rose and has stabilized below labor needed and pre-pandemic levels. Currently, about 61.8% of the eligible population is employed. With fewer adults in the workforce, it can negatively affect spending. Industry unemployment can serve as a leading indicator of construction activity and indicator of labor availability. When industry unemployment is below national unemployment, it’s yet another indicator of the low supply of labor for our industry.  Some of this strain is likely to increase as foreign-born labor is reduced, which is nearly one-third of our industry's labor source.

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3. Material Costs and Tariff Pressure

Material costs and tariff pressures are considerably elevated in 2026. The Producer Price Index (PPI) tracks changes in construction material costs, from raw materials to finished products. Some material costs have moved gradually higher over the past year, driven by recovering demand and ongoing tariff pressures. This includes iron and steel, lumber and wood products, and total commodities. Price sensitivity is pushing customers toward competitors in ways that aren’t always visible, so manufacturers and suppliers must be vigilant in tracking and reinforcing loyalty.

4. Housing and Project Affordability

Housing affordability, as measured by the National Association of Realtors’ Housing Affordability Index, deteriorated sharply through 2023 and early 2024. There was improvement through mid- to late 2025, as rates eased and incomes rose, but conditions remain weak by historical standards and continue to limit the pool of qualified buyers.

Financial pressure is driving homeowners to postpone projects, and those who are scaling back projects are making different product choices than they were two years ago. Both contractors and homeowners are also trading down on product choices for both new construction and remodels and/or reducing budgets, as shown in our quarterly Contractor Activity Tracker, produced in partnership with the Home Improvement Research Institute (HIRI). These behavior patterns are reshaping category demand from the bottom up. Additionally, there is an ever-growing divide among households of different income levels when it comes to both consumer sentiment and project intent. Affordability constraints have concentrated buying power among the top 20% of housing incomes, who spend differently and are more confident investing in their home.

5. Consumer Sentiment

Consumer confidence has weakened and expectations have softened over the past year, a mix that will reduce spending. The Construction and Remodeling: Industry Drivers and Forecast Report reveals that the economy was a primary concern for:

• 49% of homeowners making $80K or less
• 48% of homeowners making $80K to $159K
• 48% of homeowners making $160K or more

Additionally, inflation was a concern for:

• 46% of homeowners making $80K or less
• 47% of homeowners making $80K to $159K
• 43% of homeowners making $160K or more

The feeling that it’s a bad time to buy is near historic highs, with roughly three-fourths of homeowners sharing that sentiment. Historically, though, this negative home-buying attitude is rate-driven, not permanently embedded, and should improve as rates drop and affordability improves. Sentiments that are tied to rates often shift faster than most brands are prepared for. Know where your brand stands in your customers’ awareness and consideration and close the gaps, so you are poised to be more competitive once consumer sentiments change for the better.  

How Does the SF Outlook Affect Repairs and Remodeling?

The average age of the housing stock in the U.S. has been creeping higher since the Great Recession as a result of underbuilding of new homes and older homes remaining in inventory. The median age of owner-occupied homes is now approximately 44 years, although the age of the housing stock varies by region, with the oldest homes in the Northeast and new homes in the South.

This shifts demand toward repairs and remodels, as homeowners seek to improve their current residences. That includes both maintenance and lifestyle upgrades. While overall growth in the remodeling sector remains slow, discretionary upgrades (such as kitchen and bath updates, outdoor living enhancements, and energy efficiency improvements) are picking up as homeowners redirect resources toward improving rather than relocating.

At the same time, however, mobility is at a record low, suppressing transaction-trigger home improvement spend, or sellers sprucing up their existing home to entice buyers.

As movers and stay-and-improve homeowners have different motivations and purchase behaviors, it is critical for manufacturing product brands to understand what is driving product selection and ensure their product assortment and channel strategy speaks to both segments.

How Does the SF Outlook Affect Multi-family Housing?

While SF housing projections are muted for 2026, the MF sector is outperforming expectations, improving the overall outlook for housing starts in the U.S. That is due in large part to MF construction reaping the benefits of declining SF starts.

With strong household formations, people must live somewhere, and they may be choosing MF housing options while they wait for the SF housing environment to improve. Given that the average build time for MF housing is 18 months, this provides some consistency and stability for all industry stakeholders.

Based on findings in the Construction and Remodeling: Industry Drivers and Forecast Report, about 4% of contractors expect higher value for MF housing projects than in previous years. The sectors where there are notably high expectations when it comes to the value of available projects (compared to previous years) include:

• Data centers (57% expect higher value)
• Power (34% expected higher values)
• Other Healthcare Facilities, such as clinics, testing and screening facilities, and medical labs (24% expect higher value)

With MF housing construction going strong, manufacturers and suppliers may find the greatest opportunity is category- specific, depending on if the product is primarily utilized in the early or late stage of the build.

Responding to Single-Family Housing Trends in 2026

SF starts and permits remain constrained, although they are expected to stabilize in the latter half of 2026. On the flip side, strength in the MF housing sector will continue to offset SF softness, maintaining momentum for total housing construction. Remodeling demand is shifting from transaction-driven to lifestyle-driven, as migration slows and homeowners invest in place.

These trends signal continued caution from builders and a greater need to compete for building products manufacturers. While navigating this complex environment, nuanced, market-specific insights are more valuable than ever, and The Farnsworth Group can help by working with your brand to conduct custom market research. Whether you’re tracking builder sentiment, product demand, or homeowner behavior, 2026 will require a sharp focus on how changing motivations and economic conditions intersect with residential construction trends.

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