Housing Starts Overachieved In March Amid Warning Signs Aplenty

Housing starts spiked in March to their highest point in more than a year, but economists caution that this increase is likely temporary as ongoing economic and geopolitical uncertainty roil a near- and mid-term outlook. 

According to the U.S. Census Bureau’s new residential construction data released on Wednesday, housing starts in March jumped to levels not seen since December 2024. 

However, other key measures of new housing production activity – permits issued, new housing completions and units under construction – all fell, signaling the kind of underlying weakness in the homebuilding market that unnerves homebuilders and mutes new activity.

Forecasts call for relatively flat growth or a very modest uptick in housing starts for the whole of 2026. 

Still, the March results came in strong, exceeding economists’ and investors’ expectations. Housing starts increased in March by a higher-than-expected adjusted annual rate of 1.5 million units. The results reflect a 10.8% gain compared with the roughly 1.35 million starts in February.

Single-family starts rose 8.9% annually and 9.7% month-over-month to a seasonally adjusted annual rate of 1.03 million units. Multifamily starts grew by an even larger 15.5% annually and 13.3% compared to February to a 470,000-unit annual pace. 

February’s housing starts were relatively weak, declining by 2.65% compared with January. An uptick in starts during March could at least partially be the result of weather-related conditions in January and February that delayed projects, according to First American Senior Economist Sam Williamson. 

“The turnaround suggests the February pullback was likely amplified by unfavorable winter weather rather than a clean signal of weakening underlying demand. Severe winter storms and cold weather in late January likely disrupted construction activity in parts of the country, while warmer weather in March helped builders restart projects,” Williamson said in a provided statement.

Generally, housing starts have grown much faster in the Northeast and Midwest over the last year. Those markets didn’t experience a surge in new construction earlier this decade, and generally have an undersupply of new homes. Meanwhile, many high-growth Sun Belt markets are still working through an excess of new housing supply after homebuilders increased speculative development following the COVID pandemic. 

Unsurprisingly, total new housing starts increased the most in the Northeast (38%) and the Midwest (7.8%) last month. The South experienced a smaller 3.0% increase, and new starts actually fell by a substantial 15% in the West. However, the South continues to generate the highest volume of new construction, accounting for about 53% of all new housing starts in March. 

Warning signs continue to flash

While new starts trended positive last month, new permits, completions and units under construction – measures of both homebuyer demand and homebuilder confidence in sustainable demand – all show symptoms of market weakness, both present and near-future. 

Permits decreased by 10.8%, including a 3.8% drop for single-family and a 21.5% decrease for multifamily. Additionally, units under construction fell 9.8% year over year. When broken down by housing type, single-family units under construction nosed down 7.3%, while multifamily units under construction cratered by 11.8%. 

Single-family completions also slowed by 14.5% compared with March 2025, and multifamily completions slowed down by 9.1%. Put together, total completions were down 13.5% on an annual basis. 

What this means for the homebuilding market

The unexpected boost in starts last month doesn’t mean that there will be a boom in new construction in the months ahead and during the remainder of the year. While starts picked up in March, homebuilder confidence also ticked down to its lowest level since last summer. Economic uncertainty and higher mortgage rates weighed on the outlook. 

“The rebound does not point to a construction surge,” Williamson explained, pointing to weak homebuilder sentiment. “Momentum is stabilizing, but confidence isn’t there yet. Builders are staying active, just not accelerating. The housing market is still underbuilt, but affordability pressures and cautious sentiment point to a slow, uneven recovery, not a boom.”

The National Association of Home Builders (NAHB) also foresees a slow recovery, forecasting a 1% uptick in housing starts for 2026 as a whole before an anticipated 5% increase in 2027, assuming that rates stay below 6.0% for an extended period. 

However, even a modest increase or flat growth in housing starts this year would stand as an improvement over 2025, when starts declined by 7%. 

Zillow Senior Economist Orphe Divounguy additionally noted that rising resale inventory — active listings grew 5.5% between February and March — could impact the new home market. 

“Rising competition from resale inventory could continue to weigh on new home sales and thus, future building projects. Rising construction costs and labor shortages could also temper new development,” Divounguy said.