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More New Homes Are Underway, But Financing May Decide Who Wins

Sep 18, 2026
More New Homes Are Underway, But Financing May Decide Who Wins
VP of Content

Single-family construction rebounded in August, but falling permits, fewer completions, and widespread builder incentives point to a tougher fight for the purchase loans those homes eventually produce

KEY TAKEAWAYS
  • Single-family housing starts rose 7.6% in August, but falling permits show builders remain cautious about future construction.
  • Fewer completed homes reached the market, limiting the immediate inventory available to buyers and originators.
  • With 66% of builders offering incentives, financing concessions are playing a growing role in new-home sales.
  • Independent originators face tougher competition from builder-affiliated lenders but can help buyers compare the true value of buydowns and other incentives.

Builders broke ground on more single-family homes in August, creating potential purchase opportunities for mortgage originators in the months ahead. But they also pulled back on permits for what comes next, signaling that the rebound may not last.

Single-family housing starts rose 7.6% in August to a seasonally adjusted annual rate of 918,000, according to the latest U.S. Census Bureau and Department of Housing and Urban Development report. That was 5.2% above the pace recorded a year earlier and the strongest reading in five months.

The improvement was concentrated in the Midwest and West, where single-family starts increased 23.3% and 28.6%, respectively. Starts declined in the Northeast and South.

But permits, a more forward-looking measure of construction, moved in the opposite direction. Single-family authorizations fell 1.8% to an annual rate of 878,000, although they remained 1.3% above August 2025.

That means builders began homes at a faster annualized pace than they authorized replacements for the construction pipeline.

The figures do not necessarily mark the beginning of a sustained pullback. Monthly construction data can be volatile, and the Census Bureau cautioned that the estimated increase in single-family starts was not statistically distinguishable from no change.

July’s single-family estimate was also revised higher, from 808,000 to 853,000, making the August rebound less dramatic than the initial July figure suggested.

Builders Cautiously Manage The Pipeline

“Single-family construction showed some life in August, but builders aren’t stepping on the gas just yet,” First American Chief Economist Mark Fleming said. “New-home inventory remains elevated, affordability is still keeping buyers on the sidelines, and incentives are doing much of the work to generate sales.”

Fleming said the six-month trend in single-family starts has stabilized at roughly 915,000. But permits and completions continue to move lower, suggesting builders are cautiously starting homes that have already been permitted while tightening the pipeline behind them.

The number of homes authorized but not yet started reached an annual rate of 280,000 in August, up 12.9% from a year earlier, according to KPMG’s analysis of the Census data.

A permit allows construction to begin, but it does not require a builder to move forward. The growing backlog shows that builders have more approved projects waiting on the sidelines.

“Months’ supply of new homes remains elevated, and permit growth has generally slowed as inventory has accumulated,” Fleming said. “With plenty of new homes already available relative to the current pace of sales, builders have little reason to push production much higher until that inventory comes down or demand improves.”

Starts Are Up, But Fewer Homes Are Ready Now

The August increase in starts should eventually add to the supply of homes available for purchase. It does little, however, to improve inventory immediately.

Single-family completions fell 10.4% during the month to an annual rate of 816,000. Overall housing completions declined 11.9% to 1.13 million and were 27.1% below their year-earlier pace.

For originators, that creates two different timelines. More single-family homes are now moving through construction, potentially producing purchase loans in the months ahead. But fewer newly completed homes reached the market in August for buyers seeking something ready now.

The broader construction market was also weaker than the single-family figure suggests. Total housing starts declined 2.6% to an annual rate of 1.275 million, largely because starts in buildings with five or more units plunged 22.5% to 344,000. Total starts were down 1.2% from a year earlier.

Financing Becomes Part Of The Sales Pitch

Builder sentiment supports the cautious outlook. The National Association of Home Builders/Wells Fargo Housing Market Index fell three points in September to 32, its lowest reading in a year. Any number below 50 indicates that more builders view conditions as poor than good.

Confidence has now remained below 40 for 17 consecutive months. The survey’s measure of expected sales over the next six months fell six points to 37, while prospective-buyer traffic remained at 23.

Builders are leaning heavily on incentives to generate demand for the homes they have available. In September, 66% reported using sales incentives, up from 63% in August, according to NAHB. Those incentives can include mortgage-rate buydowns, closing-cost assistance, and upgrades.

Another 38% of builders said they had reduced prices, up from 35% in August and the highest share in eight months. The average reduction remained 6%.

That creates a challenge for independent originators competing for new-construction borrowers. A builder-affiliated lender may be able to pair a home with a subsidized rate or other concessions that are difficult to match through rate alone.

But it also gives originators an opening. Buyers need help comparing the full cost of an incentive package, including whether a buydown is temporary or permanent, how the offered rate compares with outside financing, and whether using the builder’s lender affects the price or other concessions.

Originators can also focus on smaller and regional builders that may not operate captive mortgage companies, as well as buyers considering existing homes and quick-move-in inventory.

August’s report is not evidence of a broad homebuilding recovery. Single-family starts have stabilized, but permits and completions continue to trend lower.

“With new-home inventory still elevated and buyers sensitive to affordability, builders remain cautious until they see a more convincing increase in demand,” Fleming said.

For mortgage professionals, the near-term opportunity lies in the homes already moving through the pipeline. Winning those loans may depend less on waiting for more inventory and more on showing buyers what the financing incentives attached to that inventory are really worth.

 
About the author
VP of Content
Czarinna Andres is Vice President of Content at NMP, where she leads editorial strategy, content development, and coverage of the trends, policies, and business decisions shaping the industry. Her work focuses on delivering…
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