CEDAR RAPIDS, Iowa — A new report from the U.S. Census Bureau points to growing turbulence in the housing market, with fewer new homes reaching completion. While some privately owned projects are breaking ground, building permits—a leading indicator of future construction—are trending downward, signaling continued challenges ahead.
Economists and builders alike say a mix of tariffs, elevated interest rates, and labor shortages is reshaping the housing construction landscape.
David Frisvold, professor of economics at the University of Iowa, explained that these pressures are creating ripple effects that extend well beyond developers.
“A change in the overall supply of housing is going to influence not just people who are purchasing houses, but also people who are renting from others who have purchased,” Frisvold said.
The slowdown comes at a time when many families are already struggling with affordability. While supply may appear to be loosening in some areas, Frisvold noted that demand is more complicated.
“I would say a handful of things are going on with the demand side. Some of it is uncertainty that individuals are facing in terms of whether or not to make new purchases. You have a lot of uncertainty in the labor market, a lot of uncertainty related to inflation, and you have high interest rates. Those are just some of the reasons why people are less willing to make new home purchases compared to a few years ago,” he said.
For construction companies, the slowdown is showing up in the availability of workers and the pace of projects. Mark Prahm, who runs a Cedar Rapids construction company, said his crews are still busy but not at the pace they once were.
“Obviously, there's not as much demand as we're seeing now in the market. When there isn’t as much demand, some of those larger crews—whether it’s your HVAC guys, your plumbing guys, your electrical guys—just don’t have as many employees to send out to job sites,” Prahm said.
His comments reflect a broader issue: a tightening labor market, where skilled trade workers are in short supply, leaving gaps in key areas of construction even as demand fluctuates.
Frisvold pointed to global trade policy as another factor weighing on builders and buyers. Discussions around tariffs, he said, have added uncertainty to both material costs and financing.
“There's going to be a lot of uncertainty related to tariffs, and the tariffs are also playing a role in interest rates,” Frisvold explained. “So some of that’s just the uncertainty. And with higher interest rates, you're going to see fewer loans to undertake new projects. You’re going to see fewer loans to purchase new homes.”
Higher interest rates are not only making mortgages more expensive but also raising costs for developers who need loans to finance new housing projects.
For now, experts say the market remains steady, even if growth has slowed. Builders continue to move projects forward, but at a more cautious pace. Renters and buyers, meanwhile, may continue to face uncertainty as policymakers and the Federal Reserve weigh next steps on tariffs and interest rates.
While the industry is not in a downturn, the signals suggest a cautious period ahead—where affordability, labor supply, and policy decisions will play critical roles in shaping the housing market over the next several years.
Originally reported by Feven Zewdu in Iowa's News Now.
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