Nationally, according to the quarterly all-transactions House Price Index (HPI) released by the Federal Housing Finance Agency (FHFA), U.S. house prices rose 5.4% in the fourth quarter of 2024, compared to the fourth quarter of 2023. The year-over-year rate has decreased from a high of 20.6% in the second quarter of 2022, but is higher than the previous quarter’s rate of 5.2%.

The quarterly FHFA HPI not only reports house prices at the national level but also provides insights about house price fluctuations at the state and metro area levels. The FHFA HPI used in this article is the all-transactions index, measuring average price changes in repeat sales or refinancings on the same single-family properties.  

Between the fourth quarter of 2023 and the fourth quarter of 2024, 49 states and the District of Columbia had positive house price appreciation. Vermont topped the house price appreciation list with an 8.9% gain, followed by New Jersey and Connecticut both with 8.3% gains. At the other end, Louisiana had the lowest house price appreciation (+2.1%), while Hawaii was the only state to experience a price decline (-4.3%). Among all 50 states and the District of Columbia, 31 states reached or exceeded the national growth rate of 5.4%. Compared to the third quarter of 2024, 32 out of the 50 states had an acceleration in house price appreciation in the fourth quarter.

House price growth widely varied across U.S. metro areas year-over-year, ranging from -4.9% to +24.7%. In the fourth quarter of 2024, 18 metro areas, in reddish color on the map above, had negative house price appreciation, while the remaining 366 metro areas experienced positive price appreciation. Punta Gorda, FL had the largest decline in house prices, while Cumberland, MD-WV saw the highest increase over the previous four quarters.

Additionally, house prices have increased dramatically since the COVID-19 pandemic. Nationally, house prices rose 53% between the first quarter of 2020 and the fourth quarter of 2024. More than half of metro areas saw house prices rise by more than the national price growth rate of 53%.

The table below shows the top and bottom ten markets for house price appreciation between the first quarter of 2020 and the fourth quarter of 2024. Among all the metro areas, house price appreciation ranged from 11.2% to 87.8%. Ocean City, NJ experienced the highest house price appreciation. Lake Charles, LA had the lowest appreciation for the third quarter in a row.

—Jing Fu, NAHB Eye on Housing

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According to the latest U.S Census Construction Spending data, multifamily construction spending fell by 0.7% for the month, extending the downward trends that began in December 2023. This decline aligns with the weakness in the Multifamily Production Index (MPI) and a lower number of multifamily homes under construction. Improvement spending declined by 1.5% in January but was 14.3% higher compared to the same period last year. Meanwhile, spending on single-family construction rose by 0.6% in January, continuing its growth after a  five-month decline from April to August. This growth also aligns with steady builder confidence seen in the Housing Market Index. However, single-family construction remained 0.9% lower than a year ago.

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates and concerns over building material tariffs. Multifamily construction spending growth has also slowed down after the peak in July 2023. Meanwhile, improvement spending has increased its pace since late 2023.

Spending on private nonresidential construction was up 1.8% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending for the class of manufacturing ($12.4 billion), followed by the power category ($5.5 billion).

—Na Zhao, NAHB Eye on Housing

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There were 47,000 total custom building starts during the fourth quarter of 2024. This marks a 7% increase compared to the fourth quarter of 2023. Over the last four quarters (2024 as a whole), custom housing starts totaled 181,000 homes, just below a 2% increase compared to the prior four quarter total (178,000 in 2023).

Currently, the market share of custom home building, based on a one-year moving average, is approximately 18% of total single-family starts. This is down from a prior cycle peak of 31.5% set during the second quarter of 2009 and the 21% local peak rate at the beginning of 2023, after which spec home building gained market share.

Note that this definition of custom home building does not include homes intended for sale, so the analysis in this post uses a narrow definition of the sector. It represents home construction undertaken on a contract basis for which the builder does not hold tax basis in the structure during construction.

—Robert Dietz, NAHB Eye on Housing

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The finished lot was the second largest cost at 13.7% of the sales price, down more than four percentage points from 17.8% in 2022.  The share of finished lot to the total sales price has fallen consecutively in the last three surveys, reaching a series low in 2024.

The average builder profit margin was 11.0% in 2024, up less than a percentage point from 10.1% in 2022.  

At 5.7% in 2024, overhead and general expenses rose when compared to 2022 (5.1%).  The remainder of the average home sale price consisted of sales commission (2.8%), financing costs (1.5%), and marketing costs (0.8%).  Marketing costs were essentially unchanged while sales commission and financing costs decreased compared to their 2022 breakdowns.

Construction costs were broken down into eight major stages of construction. Interior finishes, at 24.1%, accounted for the largest share of construction costs, followed by major system rough-ins (19.2%), framing (16.6%), exterior finishes (13.4%), foundations (10.5%), site work (7.6%), final steps (6.5%), and other costs (2.1%).

Explore the interactive dashboard below to view the costs and percentage of construction costs for the eight stages and their 36 components.

Table 1 shows the same results as the dashboard above in table format.  Please click here to be redirected to the full report (which includes historical results back to 1998).

—Eric Lynch, NAHB Eye on Housing

The post Cost of Constructing a Home in 2024 appeared first on Residential Design.

In addition to those top tier challenges, 55% to 60% of builders also reported facing serious problems in 2024 with gridlock/uncertainty in Washington (60%), building material prices (57%), concern about employment/economic situation (55%), impact/hook-up/inspection and other fees (55%), and negative media reports making buyers cautious (55%). Looking ahead at 2025, significantly fewer builders expect gridlock/uncertainty in Washington (32%) or have concerns about the employment/economic situation (39%).  In contrast, more builders are expecting building material prices to be a problem in 2025 (64%) and about the same expect continuing problems with impact and other fees (58%).

Builders have been asked about their most serious challenges every year since 2011. High interest rates have been a problem for a negligible share of builders (under 10%) during most years, except for 2022 (66%), 2023 (90%), and 2024 (91%).  When first introduced to the survey in 2021, 63% of builders reported challenges with rising inflation in the U.S. economy, but the share grew to at least 80% in 2022, 2023, and 2024. Prior to 2022, relatively few builders reported problems with buyers expecting prices or interest rates to fall, but that share rose to 49% in 2022, 71% in 2023, and 77% in 2024.

The cost/availability of developed lots has been a serious challenge to most builders in nine of the 14 years of the series history. In 2022, 51% of builders faced this problem; by 2024, 63% did—tying a record high set in 2019. Meanwhile, more than half of builders have reported the cost/availability of labor as a serious problem for the past 11 years in a row. While 82% and 85% of builders faced this challenge in 2021 and 2022, respectively, the share has eased to 73% in 2023 and to 61% in 2024.

For additional details, including a complete history for each reported and expected problem listed in the survey, please consult the full survey report.

—Ashok Chaluvadi

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The monthly increase in total private construction spending was primarily driven by higher spending on single-family construction and residential improvements. Single-family construction spending was up 1% for the month. This marks a continuation of growth after a five-month decline from April to August, aligning with steady builder confidence seen in the Housing Market Index. However, single-family construction remained 0.8% lower than a year ago. Improvement spending rose by 2.6% in December and was 21.9% higher compared to the same period last year. In contrast, multifamily construction spending edged down 0.3% in December, following an 8.4% increase in October and a 0.8% up in November. Compared to a year ago, multifamily construction spending was still 10.5% lower.

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates. Multifamily construction spending growth has also slowed down after the peak in July 2023. Meanwhile, improvement spending has increased its pace since late 2023.

Spending on private nonresidential construction was up 2.3% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending for the class of manufacturing ($23.6 billion), followed by the power category ($4.5 billion).

—Na Zhao

The post Private Residential Construction Spending Rises 1.5% in December appeared first on Residential Design.

With recent commentary from the Federal Reserve citing current policy as “meaningfully restrictive”, inflation remaining sticky, and uncertainty caused by current trade policy, NAHB is forecasting any potential cuts (if any) to the federal funds rate to occur in the latter half of 2025.

Residential Mortgages

The Federal Reserve classifies any loan category achieving a value between -5 and +5 as “essentially unchanged.”  Five of seven residential mortgage loan categories saw a slight easing in lending conditions, as evidenced by their positive easing index² values, ranging from +1.8 to +4.0, in the fourth quarter of 2024.  That marks the highest number of residential mortgage loan categories showing easing since the Federal Reserve started raising interest rates back in first quarter of 2022.  Subprime and Non-QM jumbo loans were the only categories that were negative for the fourth quarter of 2024, representing tightening conditions.  

All residential mortgage loan categories reported at least modestly weaker demand in the fourth quarter of 2024, except for Non-QM jumbo which was essentially unchanged.  Subprime loans have had weaker demand for the past 18 consecutive quarters, which is the longest weak streak among all residential mortgage loan categories and recorded the lowest net percentage (-45.5%) in the quarter.

Commercial Real Estate (CRE) Loans

Across CRE loan categories, construction & development loans recorded a net easing index value of -9.5 for the fourth quarter of 2024.  As for the multifamily loan category, its net easing index value was -3.2, or essentially unchanged.  For overall CRE loans, results show at least 11 consecutive quarters of tightening lending conditions.  However, the tightening was less pronounced than in recent quarters; the net easing index values for both categories were the closest they have been to neutral (i.e., 0) since the first quarter 2022.

The net percentage of banks reporting stronger demand for construction & development loans was -6.3% and –4.8% for multifamily.  Although weaker demand has continued for the past 10 consecutive quarters for both CRE loan categories, the net percentages are approaching neutral. For the fourth quarter of 2024, the net indices reached their highest levels in over two years.

—Eric Lynch

1. The Federal Reserve uses the following descriptors when analyzing results from the survey which will be used, in principle, within this blog post as well:
   – “Remained basically unchanged” means that the change or actual reading is greater than or equal to 0 and less than or equal to 5 percent.
   – “Modest” means that the change or actual reading is greater than 5 and less than or equal to 10 percent.
   – “Moderate” means that the change or actual reading is greater than 10 and less than or equal to 20 percent.
   – “Significant” means that the change or actual reading is greater than 20 and less than or equal to 50 percent.
   – “Major” means that the change or actual reading is greater than or equal to 50 percent. ︎
2. A value above zero (i.e., positive) indicates that lending conditions are easing while a value below zero (i.e., negative) indicates that lending conditions are tightening. ︎

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The monthly increase in total private construction spending was primarily driven by higher spending on single-family construction and residential improvements. Single-family construction spending inched up by 0.3% for the month. This marks a continuation of growth after a five-month decline from April to August, aligning with steady builder confidence seen in the Housing Market Index. However, single-family construction remained 0.7% lower than a year ago. Improvement spending rose by 0.4% in November and was 13.4% higher compared to the same period last year. In contrast, multifamily construction spending declined by 1.3% in November, following a 0.3% increase in October. Compared to a year ago, multifamily construction spending was still 9.5% lower.

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates. Multifamily construction spending growth has also slowed down after the peak in July 2023. Meanwhile, improvement spending has increased its pace since late 2023.

Spending on private nonresidential construction was up 1.7% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending for the class of manufacturing ($23.4 billion), followed by the power category ($6.1 billion).

—Na Zhao

The post Private Residential Construction Spending Inches Up in November appeared first on Residential Design.

Import use varies significantly by type of building product. Shown above are the ten most import reliant products that are used in new residential construction. These products are defined by North American Industry Classification System (NAICS).

The U.S Census Bureau reports data on international trade of goods by NAICS definitions. With this, we can locate which nations are responsible for importing products used in residential construction into the U.S. Using the commodities that are used in residential construction, a significant share comes from China, at 27%. Mexico was the second most important nation with around 11% followed by Canada at 8%. Shown below are the countries with the 10 highest shares along with the remaining 27% from countries outside the top 10.

Tariff Impact

During the election campaign, President Trump promised the enactment of a tariff plan ranging from 10%-20% on imported goods, with 60% tariffs on imports from China. A tariff is essentially a tax on an imported good, meaning the importer pays an additional tax for importing such an item from another country. For example, say a business in the United States needed to purchase a $100 worth of screws from China. With a 60% tariff, the business would then need to pay an additional $60 to the U.S. Government to receive the screws. The exporter in China would still receive the $100 from the business and not pay the added tariff costs. The tariff cost falls on the importer, who would absorb the higher costs through lower profit margins or raising their own prices for consumers.

Without additional detail for these tariff proposals, it is difficult to estimate the impact of these tariffs. Using our best estimate, a 10% tariff on all imports with a 60% tariff on imports directly from China would result in a $3.2 billion increase in the cost of imported building materials used in residential construction. By product, the largest increase in cost would be for household appliances, where 54% of imports come from China, this tariff adds $670 million for these imported products. Additionally, a 20% tariff coupled with 60% imports from China would result in $4.2 billion in added cost of imported residential building products.  

From Canada, the U.S. imports a significant amount of wood related products. In 2023, 70% of sawmill and wood product imports came from Canada. Many of these wood products from Canada are already subject to tariffs, with the current rate at 14.5%. Total imports of sawmill and wood products from Canada in 2023 was $5.8 billion. The highest valued import from Canada was nonferrous metals, totaling $17.6 billion in 2023.

Turning to Mexico, 71% of lime and gypsum products imported in 2023 originated from Mexico. While this share is particularly high, the total value of imports in 2023 of lime and gypsum was only $456 million. The highest valued import from Mexico at $28.6 billion in 2023 was computer equipment, where imports from Mexico made up 23% of total imports of computer equipment in 2023.

—Jesse Wade

1. To adjust this data to 2023, we inflate products used in single-family and multifamily residential structures by the respective increases in residential fixed investment. This inflation factor represents the change in dollar value of residential construction output. Imports are adjusted by the corresponding change in dollar value of goods imports from 2017 to 2023.  ︎

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The monthly increase in total private construction spending was primarily driven by higher spending on residential improvements. Improvement spending surged by 2.7% in October and was 18.5% higher compared to the same period last year.

Spending on single-family construction inched up by 0.8% for the month. This marks a continuation of growth after a five-month decline from April to August, aligning with the rising builder confidence. Compared to a year ago, spending on single-family construction was 1.3% higher.

Meanwhile, multifamily construction spending ended its streak of ten consecutive monthly declines, edging up by 0.2% in October. Despite this slightly monthly gain, multifamily construction spending remained 6.8% lower compared to a year ago.

The NAHB construction spending index is shown in the graph below. The index illustrates how   spending on single-family construction has slowed since early 2024 under the pressure of elevated interest rates. Multifamily construction spending growth has also slowed down after the peak in July 2023. Meanwhile, improvement spending has increased its pace since late 2023.

Spending on private nonresidential construction was up 3.5% over a year ago. The annual private nonresidential spending increase was mainly due to higher spending for the class of manufacturing ($32.9 billion), followed by the power category ($6.4 billion).

—Na Zhao

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