Spring 2026 Construction Forecast

Each quarter, US Assure CEO and President Alan Ferguson joins us in the studio to discuss key factors contributing to changes in the construction industry, a forecast for the coming months, and how it will impact your business opportunities.

Read the Video Transcript:

Welcome to the Builders Risk Outlook.

Now into the second quarter of 2026, residential construction continues to show signs of resilience. 

But a cocktail of factors including affordability challenges, elevated interest rates, labor shortages, building constraints and economic headwinds are limiting contractors’ abilities to fully address the nation’s housing shortage.

In this installment, we’ll discuss:

• Stabilizing construction activity and constraints impacting it
• The widening gap between single‑family and multifamily construction
• Affordability and financing conditions reshaping builder behavior
• Regional outcomes, influencing where growth holds and where it softens

Construction Activity and Constraints

Recent U.S. Census data indicate that overall housing starts have been volatile but relatively stable in early 2026. In January 2026, privately owned housing starts reached a seasonally adjusted annual rate of roughly 1.49 million units, modestly higher than late 2025 and up year over year compared with January 2025. 

While that stability is encouraging, the data masks an important divergence within the market.

The Housing Gap

Single family housing starts have declined modestly this year on a month-to-month basis, while multifamily construction posted stronger gains. This reflects shifting demand patterns and affordability constraints and marks a positive turn from the slowdown caused by post-pandemic supply chain disruptions.

New residential construction has increasingly tilted toward multifamily housing. Permits and starts have rebounded in several regions, particularly in the Northeast and West. After a pullback in 2023 and 2024, rental demand is strengthening, and limited supply is improving the investment outlook for apartment developers.

Single family construction, by contrast, remains more sensitive to mortgage rate movements and buyer sentiment. 

Affordability and Financing

Affordability remains the primary challenge facing residential construction. With mortgage rates hovering near or above six percent through much of 2025, prospective homebuyers saw their purchasing power significantly shrink. 

Builders responded by scaling back single family production, particularly in entry level price segments. According to the National Association of Home Builders, high financing costs, rising material prices and persistent labor shortages have combined to suppress housing production and weaken demand. 

Though underlying housing demand remains strong, these cost pressures make it difficult for builders to deliver homes at attractive price points for first time buyers.

Regional disparities are further shaping outcomes. The South, historically the most active region for residential construction, saw notable declines in single family permits and starts during 2025. This reflects affordability challenges and slowing migration. Meanwhile, parts of the Midwest and Northeast experienced relative stability or growth, driven in part by multifamily development and localized housing shortages. 

Despite these challenges, builders remain cautiously optimistic. Expectations for moderating mortgage rates have improved sentiment, with industry groups anticipating a gradual pickup in single family starts as financing conditions ease. 

But that optimism remains measured. Structural constraints—such as limited skilled labor availability, higher regulatory and land costs, and ongoing supply chain friction—continue to hamper how quickly construction can accelerate. 

The Bottom Line

US residential construction is neither in collapse nor fully recovered. Instead, it is adjusting to a new equilibrium defined by higher costs, tighter affordability and evolving housing preferences. 

Similar dynamics are playing out across commercial construction where spending is expected to grow only slightly — about enough to keep pace with inflation — meaning real growth is mostly flat. The clear exception continues to be data centers. Office and manufacturing construction are expected to continue to decline as vacancy remains high and return‑to‑office progress stays uneven, while retail and warehouse construction is largely holding steady after the post‑COVID surge. Institutional construction, such as healthcare, education and recreation, should see modest but steadier growth, largely tied to where new residential development and population growth are occurring.

While recent stability highlights resilience, sustained improvements will likely depend on easing financial conditions, efficiency gains in construction and policy efforts to expand housing supply. 

Until those forces align, residential construction and subsequent commercial construction are expected to grow unevenly, falling short of what is needed to fully close the nation’s housing gap.

See ya next time.

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