Question #8 for 2026: How much will Residential investment change in 2026? How about housing starts and new home sales in 2026?

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2026. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in this newsletter (others like GDP and employment will be on my blog).

I’m adding some thoughts, and maybe some predictions for each question.

Here is a review of the Ten Economic Questions for 2025.

8) Residential Investment: How much will Residential investment (RI) change in 2026? How about housing starts and new home sales in 2026?

If you don’t know where you are, it is difficult to decide which way to go! Due to the government shutdown, we still do not have housing starts and new home sales data for September, October and November. The Census Bureau has announced the housing data for September and October will be released in early January. Usually we have data through November already!

First a graph of RI as a percent of Gross Domestic Product (GDP) through Q3 2025:

We don't have the data yet for Q4 2025 yet, but RI as a percent of GDP will likely be down year-over-year.

The second graph shows single-family and multi-family housing starts through August 2025. Year-to-date (YTD) starts are up 0.7% compared to the same period in 2024. Single family starts are down 4.9% YTD and multi-family up 17.5% YTD.

The third graph shows New Home Sales since 1963 through August 2025. The dashed line is the August sales rate. Year-to-date, sales are down 1.4% NSA, although sales were up sharply year-over-year in August.

The next graph shows housing starts under construction, Seasonally Adjusted (SA).

Currently there are 611 thousand single family units (red) under construction (SA).

Currently there are 706 thousand multi-family units (blue) under construction.

Combined, there are 1.317 million units under construction,

In the three years prior to the pandemic, there were about 1.1 to 1.2 million housing units under construction. So, this is still higher than normal.

Conclusion

It is more difficult to forecast the future when we are not sure where we are (we are missing 3 months of data).

My guess is multi-family starts will decline in 2026, since the Architecture billings index has been negative for multi-family for 40 consecutive months. Single family starts will likely be mostly unchanged year-over-year, putting total starts down slightly in 2026.

I expect New Home sales to be mostly unchanged year-over-year.

Here are the Ten Economic Questions for 2026 and a few predictions:

• Question #9 for 2026: What will happen with house prices in 2026?

• Question #10 for 2026: Will inventory increase further in 2026?