Affordability Splits the US Housing Market as Renovation Spending Booms
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Harvard's State of the Nation's Housing study shows single-family starts fell seven per cent in 2025 with consumer sentiment near record lows — whilst a 153 per cent decade-long surge in renovation spending hands timber suppliers their one clear offset.
A new stick-built two-storey single-family home under construction in South Irving, Texas, the kind of timber-framed build that drove US single-family starts before they fell seven per cent in 2025. (Photo Credit: ID 113666609 © Trong Nguyen | Dreamstime.com)
Soaring purchase prices and deepening economic uncertainty are dragging on housing demand across the United States, even as a chronic supply shortage keeps homeownership out of reach for younger buyers. That is according to the annual State of the Nation’s Housing report from the Harvard Joint Center for Housing Studies (JCHS), which found single-family starts fell seven per cent in 2025 as unsold new homes piled up.
The report tied the slowdown to a weakening labour market that added just 116,000 jobs in 2025, the fewest in any non-recession year since 2002. With consumer sentiment near record lows and interest rates at generational highs, many young adults are doubling up or staying with family rather than forming new households that drive home sales and rentals.
Builders responded to the softer demand by cutting prices, buying down interest rates, and pivoting towards smaller homes, townhomes, and tighter lots to strip costs out of each dwelling. The pivot reduces the volume of framing timber in every new build while the overall single-family pipeline contracts.
Consumer sentiment sat near historic lows in early 2026, weighing on the household formation that drives US home sales and, with it, demand for new residential construction. (Image Credit: Harvard Joint Center for Housing Studies, The State of the Nation’s Housing 2026 / University of Michigan Surveys of Consumers)
The demand slump compounds a building season already strained by import costs, with combined US duties and tariffs on Canadian softwood lumber near 35 per cent, adding at least $10,000 to the price of a new single-family home.
Federal, state, and local officials are moving to unlock supply, with an increasing number of governments loosening zoning and land-use rules to free up buildable land. In 2025, Cambridge, Massachusetts, joined Cincinnati and Minneapolis in ending single-family-only zoning, whilst Maine followed Washington and Vermont in passing statewide reforms that allow small multifamily buildings on lots once reserved for detached houses.
JCHS senior research associate Daniel McCue said the policy response was gathering pace, speaking on a conference call discussing the findings. “We’re seeing growing momentum on the part of policymakers to address housing affordability,” McCue said.
Building codes are also holding back new supply, the report found, with several states rewriting rules last year to permit single stairwells on small multifamily buildings and ease development. The change feeds a wider trend of states pausing fresh code adoption, with Connecticut and California both recently freezing updates to give builders time to catch up.
A surge in renovation hands timber and building-product suppliers their clearest offset, with owner home-improvement spending climbing 153 per cent over the past decade. That outpaced both the 90 per cent rise in single-family construction spending and the 84 per cent gain in multifamily over the same period, the JCHS found, with repair-and-remodel demand strengthening even as new building slows.
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