When Is the Housing Market Going to Get Better?

Forecasting the return of new home construction has been an ongoing struggle this year… and so far, most of the experts have been wrong.

It’s been the big question throughout the building trade for much of the past year and despite informed predictions that a combination of lower mortgage rates, built-up demand and a slowdown in inflation would be good news, it hasn’t turned out exactly that way so far this year.

Even as inflation has eased, employment remains strong and the stock market has surged as of late, we’ve yet to see a return in new construction rates. Of course, tariffs and the uncertainties they’ve created for builders and buyers alike are big factors, but so too are interest rates that remain stubbornly static.

It’s caused a number of analysts to scale back their original projections for 2025. “The new home market has not lived up to expectations so far in 2025,” says Ali Wolf, chief economist for research firm Zonda. “There are consumers that want or need to move, but there’s really no urgency to make that decision today.”

“The combination of elevated interest rates and policy uncertainty has pushed a number of home buyers to the sidelines, which has lowered our expectations for single-family home construction,” National Association of Home Builders chief economist Robert Dietz recently said. “Right now, we are expecting single-family housing starts to be down about 5 percent in 2025. That’s a contrast from the beginning of the year, when we expected starts to be flat.”

So a round-up of the latest forecasting from a variety of resources should be taken with some caution even if the news is generally better going forward. For many forecasters, the longer term is more encouraging than the short term.

“While our latest forecast reflects some near-term adjustments due to economic headwinds, the long-term picture for the home improvement market remains one of significant opportunity,” said Dave King, executive director of the Home Improvement Research Institute. “Looking out over the next five years through 2029, we anticipate a net gain in total market spend of roughly $300 billion in additional spend. While this growth is expected to be stronger toward the latter half of the period, it reflects that the underlying appetite and demand for home improvement projects are still robust.”

TD Cowen, the analyst arm of TD Securities, acknowledges the current state of things but agrees the turnaround is coming. “We view home improvement to be holding steady with a major inflection a matter of when, not if.” It pointed to “significant” homeowner pent-up demand to move, rising deferral rates and what it called “record homeowner equity waiting to be unlocked to fund large projects.”

Still, the experts continue to hedge their bets on the short-term. “This price softening is going to be something that really gets more attention as we move into the back half of 2025,” said NAHB’s Dietz. Added Zonda’s Wolf, “There is nothing to suggest the bumpiness will settle down. We expect continued choppy sales and indecisive consumers.”

BACK TO NEWS