The Number of Housing Units Under Construction Continues to Crash

What’s the impact on rent?

Decline from Post-Covid Peak

• Total Units: 20.7 percent
• Single-Family: 25.2 percent
• Multi-Family: 27.3 percent

The decline puts the number of single-family units under construction near the middle of a very wide range of 236,000 on the low end and 990,000 on the high end.

However, the number of multi-family units under construction is still enormous historically speaking.

Impact on Rent

For three years, the consensus opinion (not mine) was that rent prices would collapse.

That didn’t happen although the rate of increase in the price of rent has slowed dramatically.

However, Trump sealing off the Southern border from immigration, could soon start having a positive impact (lower rents) if builders started too much immigration-based construction.

Under Construction vs Completions

A crash in the number of completions is also underway. Once again the decline is led by multi-family.

As completions drop, so does the necessity to lower rent prices dramatically.

Once again, the impact on rent will be whether or not builders overbuilt.

Basic Demographics

From AI: Approximately 4 million people in the United States turn 25 each year. This is based on the population figures for the 20-24 and 25-29 age groups, which each contain roughly 11 million people. Since these groups are relatively stable, and people age into them at a rate of about one year per year, around 1/2.5 of the total population in these age ranges turns 25 annually. 

Demand Factors

• Based on demographics, there’s a potential demand for an
• 4 million units annually even if immigration remains zero.
• Apartment sharing
• Moving back home or living with parents
• Death rates of boomers
• Recession

Annualized completions are 1.4 million which is also the number of units under construction.

Is that enough?

In recessions, people will move back home or take on roommates.

Factor it all in and it’s not clear if housing is overbuilt although some locations such as Austin were.

And if completions are insufficient, then rent prices will head back up.

Housing Permits Sink to the Lowest Level Since June 2020

Earlier today I noted Housing Permits Sink to the Lowest Level Since June 2020

Here’s the key point: Homebuilders can’t start what isn’t permitted.

Buyer Traffic Very Low

Yesterday, I commented Wells Fargo Housing Market Index Remains Weak, Buyer Traffic Very Low

The use of sales incentives was 66% in August, up from 62% in July and the highest percentage in the post-Covid period.

This is a very complex setup so I have no assumptions about rent.

Many people are trapped in their homes unwilling to move because of mortgage rates. Millions of others want to buy a home but cannot because of affordability issues.

Immigration demand is now close to zero and job growth is anemic.

Also see How Much Overstated Are BLS Measures of Rent and Shelter? Or Are They?

Addendum Q&A

Rural America covers a vast majority of the land area, but has only 17.2 % of the population. Roughly 279 million people in urban areas and 56 million in rural. (2023)

Some counties so small that losing half the population would change nothing.

Danville, Illinois, is… https://t.co/Rric2zjFLk— Mike “Mish” Shedlock (@MishGEA) August 20, 2025

Rural America covers a vast majority of the land area, but has only 17.2 % of the population. Roughly 279 million people in urban areas and 56 million in rural. (2023)

Some counties are so small that losing half the population would change little.

Danville, Illinois, is considered a small urban area, pop 28,000. It had 46,000 in the late 1960s when I grew up.

The county went from 91K to 71K. Nearly the whole loss was in the city itself.

This post originated on MishTalk.Com

Thanks for Tuning In!

Mish