New home construction is running out of steam, with residential building permits down 1.7% over the 12 months ending July 2026 and now running a record 19.4% below the pre-pandemic trend line, according to a new Zillow analysis. Detached single-family home completions fell 2.5% in 2025 to about 817,000, the third consecutive annual decline and the lowest total since 2020, though still 4.4% above 2019. The pullback is concentrated in Sun Belt markets that led the pandemic-era boom, with Austin permitting down 25.3% and San Antonio down 24.1%, while gains came mostly on the coasts and in the Midwest, including San Jose up 122%, Seattle up 35.8% and Birmingham up 32.9%. Builders are responding by shrinking homes, with the median newly completed detached home measuring 2,300 square feet in 2025, down from 2,400 in 2019, and lots down to a median of 8,700 square feet from 9,000. Zillow senior economist Kara Ng warned that the housing shortage that drove the building boom remains intact, and a thinner pipeline could mean a tighter market that drives up prices when buyers return.
Zillow Group Inc Class CZillow is the source of the analysis on slowing homebuilding; no company-specific financial or operational development.
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