New Housing Starts Decline as Home Builders Face Labor Shortages
The latest “storm cell” has just moved through the housing market, with new housing starts ticking down again. At first glance, it looks like demand took a breather, but in reality, there are too many projects and not enough people to build them.
Ask Maryland home builders or their peers up and down I-95 what’s slowing timelines, and they’ll tell you it’s a talent bottleneck colliding with higher financing costs. That combination reshapes what gets built and at what price.
Looking at the Numbers
Fresh federal data shows August housing starts fell 8.5% from July and were 6% below year-ago levels. Within that, single-family starts ran at a 890,000 annual rate, down 7% month over month, while multifamily clocked in at 403,000. Permits, a forward indicator, also softened.
These aren’t apocalypse numbers, but they’re a clear deceleration.
Builder sentiment echoes the slowdown. The NAHB/Wells Fargo Housing Market Index held at 32 in September, a subdued reading that indicates light traffic and suggests incentives are doing more of the talking than glossy brochures.
Labor Is the Biggest Constraint
The Home Builders Institute (with NAHB) has been blunt that the industry needs hundreds of thousands of additional workers each year to meet demand and replace retirements. Their recent analysis tallied the drag from the skilled-labor gap in the billions annually.
You might say, “If we’re short on workers, why did construction job openings just fall?” Good catch. In August, construction job openings dropped to 188,000 from 303,000 in July, a big step down, but it likely reflects slower project starts and tighter budgets, rather than suddenly abundant labor.
Openings are a demand signal for workers. When builders pull back, postings dip even if the underlying skills gap hasn’t gone anywhere.
Even as openings wobble, surveys show persistent shortages in key trades, especially the finishing work that unlocks closings. In the HBI/NAHB Construction Labor Market Report, a majority of builders reported difficulties finding finish carpenters.
How Labor Shortages Hit Starts
It’s simple, really. A missing framing crew or a thin pipeline of licensed electricians can’t be solved with a rush order. As crews get stretched, inspections push and interest accrues. Suddenly, that Q4 delivery becomes “maybe January.”
The skilled-labor shortfall is a multi-billion-dollar headwind that erases thousands of homes from the annual tally. When cycle times stretch, carrying costs rise, and pro-formas break more easily, especially with financing costs still elevated.
For New York and the surrounding region, the market reads this in nuanced ways. In the city, land constraints and approvals dominate timelines, while outside the city, labor availability and subcontractor depth can make or break a subdivision calendar.
A builder with reliable subs can hold pricing and hit dates. One without them gets stuck offering incentives and eating financing costs.
For sellers and developers marketing finished products in a slower-moving environment, presentation matters even more than usual. If you missed it, our look at real estate photography explored how the right visuals change buyer behavior long before a tour is scheduled, which becomes critical when buyers have choices and patience.
Should We Worry?
I’d say we should be watchful, but not fatalistic. Starts and permits move in cycles, and this one is running through three overlapping forces:
- Rates and spreads. Even if benchmark rates ease, the mortgage-market spread matters for affordability. Until that narrows decisively, qualified demand will keep “shopping twice, signing once.” (Builder sentiment staying in the low 30s reflects exactly that caution.)
- Labor throughput. The hiring pipeline is still thin. Trade-school partnerships and immigration policy both influence how quickly the industry can add capacity. Without a broader people strategy, each upcycle runs into the same bottlenecks.
- Project mix. Multifamily starts have cooled from the 2022–23 surge, while single-family is carrying more of the load. That mix affects both job profiles and timelines, and it shows up in the volatility of monthly data.
August’s dip in housing starts is real, but the “why” is more important than the “what.” We’re not witnessing vanishing demand so much as a capacity constraint. Builders are still selling homes, but they’re fighting a two-front war with rates on one side and labor on the other.
As the rate backdrop slowly improves and the industry invests in people and processes, today’s slowdown looks less like a cliff and more like a bottleneck.
For anyone planning a project or timing a purchase, the practical move remains the same: track starts, permits, and the labor side. When those lines start moving in the same direction, the market will feel different on the ground long before it shows up in the headlines.
