Real residential construction spending dropped 8.5% over the 12-month period ending in June 2025
Source: Construction Coverage analysis of Census Bureau data | Image Credit: Construction Coverage
To make matters worse for prospective buyers, residential construction activity has declined significantly over the past year. Inflation-adjusted spending on residential construction fell 8.5% between June 2024 and June 2025, according to federal estimates. This drop comes despite ongoing initiatives aimed at boosting housing supply.
The decline reflects a mix of economic and market pressures. High interest rates have raised borrowing costs for builders, making new projects more expensive to finance. At the same time, elevated labor and material costs have squeezed profit margins, while concerns about buyer affordability have made some developers more cautious about launching new projects. Much of this economic uncertainty has also spilled over into the non-residential sector, where construction spending has declined as well—though not as sharply as in the residential sector.
With fewer homes being built—especially at lower price points—the slowdown threatens to worsen the already limited supply of affordable housing, leaving many buyers with even fewer options.
