December 2025 housing starts, measured at a seasonally adjusted annualized rate (SAAR), rose 6.2% month over month to 1.40 million, a headline gain that appears constructive at first glance. However, Bank of America Securities (BofA) remains unconvinced, noting the market is still down 7.3% year over year and arguing that a one-month increase does little to alter the broader downtrend in residential construction activity.
The Real Problem Is Single-Family
The segment that carries the most weight, single-family homes, which account for roughly 70% of total starts, fell 9% year over year to 981,000 units. Multifamily construction saw a solid monthly rebound but remained down 3% on an annual basis. BofA argues that as long as single-family activity stays under pressure, the broader housing market is likely to remain soft, regardless of short-term volatility in multifamily starts.
A 37.4% monthly surge in the West looks dramatic until you see the South down 16.1% and the Midwest down 13.2% year-over-year. BofA flags these sharp regional divergences as precisely why aggregate monthly figures can mislead, reinforcing their cautious read on the data.
Permits Tell the Cleaner Story
BofA points to permits as the more honest indicator. While total permits edged up 4.3% month-over-month, single-family permits dropped 10.9% year-over-year even as multifamily permits surged 15.5%. That widening split, in BofA’s view, confirms the single-family pipeline remains firmly under stress.
The NAHB confidence index fell to 36 in February, well below its long-term average of 51. Over a third of builders cut prices and 65% deployed sales incentives, yet buyer traffic and present sales stubbornly remain below breakeven.
BofA projects single-family starts declining a further 2% in 2026 before a modest 2% recovery in 2027. Total starts are expected to reach 1.37 million in 2026 and 1.41 million in 2027, with multifamily carrying much of the load. Mortgage rates easing to 6.1% and MBA purchase applications rising 9.1% year-over-year are welcome signs, but BofA is careful to frame these as early stabilization signals, not the start of a meaningful recovery.
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