Multifamily housing construction closed out 2025 on a stronger note, even as the broader residential market continued to face economic headwinds.
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According to new data released Feb. 18 by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau, apartment starts posted a solid month-over-month increase in December, lifting overall housing activity.
Starts for buildings with five or more units rose 10.1% from November to a seasonally adjusted annual rate of 402,000 units — the highest monthly pace recorded in 2025. November’s revised figure came in at 365,000 units.
However, despite the late-year bump, multifamily starts were still down 1% compared to December 2024, reflecting the broader slowdown that characterized much of the year.
The December rebound suggests developers may be cautiously re-engaging after pulling back earlier in the year due to high financing costs and elevated construction expenses.
Combined housing starts — including both single-family and multifamily — reached a seasonally adjusted annual rate of 1.4 million units in December. That marks a 6.2% increase from November but a 7.3% decline compared to the same month in 2024.
Regional performance played a key role in the monthly improvement. The Western U.S. saw notable gains in new construction, helping offset softer activity in other parts of the country.
At the same time, multifamily completions declined year over year. Developers completed 483,000 apartments in buildings with five or more units in December, down 15.9% from the prior year but up 7.1% from November. The drop in completions indicates that the wave of deliveries seen in 2023 and early 2024 is beginning to taper.
There were 670,000 multifamily units actively under construction in December — 12.9% fewer than a year earlier and down 2.3% from November. That shrinking pipeline could ease supply pressures in many metro areas later in 2026.
Single-family construction remained comparatively weaker. Starts in that segment totaled 909,600 for 2025, representing a 7.4% year-over-year decline. Elevated mortgage rates and affordability challenges continued to dampen buyer demand.
Overall, an estimated 1.4 million housing units were started in 2025, ticking down 0.6% from 2024. The modest annual decline underscores that the housing market never fully regained momentum during the year.
Economists remain cautious about the near-term outlook. Matthew Nestler, senior economist at KPMG, noted that builders are still contending with higher material costs, tariff-related uncertainty, labor shortages and cautious consumers.
He added that unusually severe winter weather across the Southern U.S. — the country’s largest housing market — could weigh on January and February 2026 construction figures.
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Despite these challenges, some multifamily owners and REIT executives have expressed guarded optimism. During recent earnings calls, industry leaders cited strong absorption rates and declining project deliveries as supportive fundamentals. With fewer new apartments entering the market, landlords are hopeful that tighter supply conditions may allow for steadier rent growth in 2026.
Still, much will depend on interest rate movements and broader economic stability. If borrowing costs ease in the second half of 2026, as some forecasts suggest, residential investment could gradually strengthen. Until then, December’s multifamily rebound appears to be a positive but measured step forward rather than a full-scale recovery.
Originally reported by Julie Strupp, Senior Editor in Construction Dive.
