The U.S. housing market has faced its fair share of difficulties in 2025, including high costs, economic uncertainty and significant demographic shifts. That’s the gist of a report by Harvard’s Joint Center for Housing Studies, titled “The State of the Nation’s Housing 2025.” As a result, Harvard’s findings point to a complex outlook—one that will directly impact demand for new construction, renovation and related building products.
Housing affordability remains the primary challenge, researchers report, with costs for both homeowners and renters projected to rise. High home prices and elevated interest rates have already reduced homebuying to its lowest levels since the mid-1990s, the report says. For homeowners, increasing insurance premiums and property taxes have further heightened financial stress. A decrease in federal support for housing is another concern, researchers say, as it creates uncertainty for the availability of assistance programs.
A recent rebound in homeownership rates has also stalled, Harvard’s researchers report, with the U.S. homeownership rate falling for the first time in eight years in 2024 to 65.6%, followed by a downward bump to 65.1% in the first quarter of 2025. This is largely due to record-high home prices, relative to incomes, and elevated interest rates, the report suggests. As a result, monthly mortgage payments rose to an all-time high, at $2,570 for the median-priced home in 2024. Buyers now need an annual income of at least $126,700. Required cash downpayments, ranging from $26,800 to $95,000 for a median-priced home, further restrict access.
While existing home sales dropped to a 30-year low, reaching 4.06 million sales in 2024, new home sales increased modestly by 3%. Single-family housing starts rose by 7% annually in 2024, to 1.01 million units, consistent with the annual average since 1990.
To facilitate sales, many builders have responded by producing smaller homes or those with fewer amenities, Harvard’s report shows. The median size of new single-family homes declined for the third consecutive year in 2024, to 2,150 square feet. Construction of townhomes has also risen, with 176,000 started last year, up 59% since 2019.
On the multifamily side, a building boom is ending, the report suggests, as multifamily construction starts fell 25% in 2024, following a 14% decline in 2023. Developers struggle to finance new projects, due to rising operating costs and higher interest rates, data suggests. So far as construction materials are concerned, costs grew by 36% between February 2020 and February 2025. Researchers point to newly imposed tariffs, which are expected to increase new home prices.
Persistent labor shortages also plague the construction industry, which averaged 282,000 job openings for the 12 months ending February 2025—a historically high volume. Reduced immigration, which historically accounts for a third of construction workers, could further shrink the labor pool, Harvard’s report indicates. This shortage could lead to project delays and increased labor costs, impacting demand for products that require specialized installation. In the meantime, lower-cost off-site methods, such as modular or panelized construction, could reduce construction time by up to 50% and costs by as much as 20% for multifamily buildings, Harvard’s findings suggest.
Two factors that are expected to keep remodeling and replacement projects moving include an aging housing stock and the increasing frequency and severity of climate disasters. There’s a growing need for resilient building materials and methods to repair and rebuild aging and damaged homes, Harvard’s researchers point out.