Economists speaking at the International Builders’ Show (IBS) in Las Vegas last week pointed to conflicting market conditions, such as policy moves in the areas of regulatory reform and extension of the 2017 tax cuts, along with tariff and immigration actions, as factors that could negatively impact housing. The primary obstacle could be increased costs for building, they said. As such—or in spite of these factors—the National Association of Homebuilders (NAHB) reports that it expects single-family housing production to register a slight uptick in 2025.
With that said, NAHB officials point to other developments, such as stubbornly high shelter inflation that accounts for more than half of the increase in the overall Consumer Price Index, and tight lending conditions for construction and development loans, as factors that will continue to weigh heavily on the housing market this year.
“Home builders and remodelers are dealing with positive and negative risks in the months ahead,” said NAHB chief economist Rob Dietz. “With shelter inflation still rising at a 4.4% annual clip and a housing shortage of roughly 1.5 million units, the best way to bend the rising housing cost curve is for the Trump administration and Congress to enact policies that will allow builders to construct more attainable, affordable housing.”
NAHB officials said the organization’s 10-point housing plan addresses these issues, including the need to eliminate excessive regulations, promote careers in the skilled trades and fix building material supply chains, among other issues. With the Federal Reserve mulling future risks to both inflation and unemployment, NAHB forecasts that mortgage rates will unevenly trend toward 6% by the end of next year. But the process won’t be smooth, they warned, with rates anticipated to move sideways or even lurch higher at times over the next year if the nation experiences larger fiscal deficits.
As policy scenarios play out, such as regulatory reform and tax cuts, and tariffs and immigration changes provide opposing effects, the NAHB projects that single-family starts will inch up 0.2% this year to an annual rate of 1.01 million units, while rising an additional 4% in 2026 to a 1.05 million pace.
On the multifamily front, construction should stabilize later this year, as lower short-term interest rates improve the financing outlook for apartment development. NAHB is forecasting an 11% decline in multifamily output this year to a 317,000 annual pace with multifamily starts rising 6% next year, to 336,000 units.
Meanwhile, with an aging housing stock and record levels of home equity, there are positive growth prospects for remodeling. NAHB anticipates residential remodeling will expand 5% in 2025 and an additional 3% in 2026.
A recent survey showed that 20% of respondents were willing to pay up to $500 more monthly for a mortgage than their current rent and more than 10% of those surveyed would pay up to $1,000 more for a mortgage than their present rent. Moreover, another 10%-plus of those surveyed said they would be willing to pay more than $1,000 above their current rent to own a home. However, current market conditions are locking such potential home buyers in place, including high interest rates and greater opportunities for affordable deals at rental communities.
In terms of supply and demand, the housing market is gradually shifting to a more neutral stance. With a buyer’s market defined as a greater than six-month supply of housing and seller’s market as less than a four-month supply, the market has slowly edged up from a 2.3-month supply in 2021 to a projected 4.1-month level this year.
“Inventory is recovering faster than sales, and this is leading to a more balanced market,” said Danielle Hale, chief economist at Realtor.com. “Inventory growth is being fueled by newly listed homes, which were up 10.8% year over year in January 2025.”
Because homeownership is still highly valued and something for which many aim, a panel of industry experts at IBS opined that aging housing stock, record levels of home equity and favorable demographics will create positive growth prospects for the remodeling sector in 2025.
The NAHB says that outlook bodes well for the remodeling sector. Consumer inflation remains a concern as shelter costs continue to be sticky despite tightening measures by the Federal Reserve. And while lower mortgage rates are potentially on the horizon, the process will be bumpy, as long-term interest rates could remain flat or even increase with larger fiscal deficits. These ongoing housing affordability challenges signal that demand for remodeling projects will remain solid in 2025.