In the “American Real Estate Hotspots: Leo’s Notes” channel, the most-watched video is not about the retirement cities most favored by Chinese Americans, nor about the preferred residential locations of Chinese Americans. Surprisingly, it is the episode on “The Trend of New Home Construction in the United States,” accumulating about sixty-five thousand views. To satisfy everyone’s love and attention for this topic, this time I have decided to further explore this theme, allowing everyone to understand the major questions about buying new homes, the construction trends and sales incentives in several key states with significant Chinese populations.
Let’s first focus on the current National Association of Home Builders (NAHB) Housing Market Index, which measures the confidence of single-family residential builders across the United States in the current housing market conditions and future prospects. The index reflects builders’ evaluations on three key aspects: current new home sales conditions, future sales expectations in the next six months, and the foot traffic of potential buyers. Each index is the average result of builder survey questionnaires, and when combined, it forms the overall builder confidence index. The index ranges from 0 to 100: >50 indicates optimism, =50 indicates neutrality or mixed sentiment, and <50 indicates pessimism.
In May 2025, the NAHB announced that the builder confidence index had dropped to 34, the lowest point since December 2022. The reasons for the decline include high interest rates, rising construction costs, tariff uncertainties, and unclear economic prospects. With costs rising but demand not booming, builders may need to offer various incentives to boost sales, which could compress profits.
As a result, we can see that in April, there was an overall 1.7% decrease in construction starts compared to the previous year. Single-family homes saw a 2.1% decrease in starts, while multifamily units experienced a steep 30.7% year-on-year increase. Why did multifamily housing starts see such a significant rise? Let's delve into that shortly. Additionally, building permits issued in April dropped by 3.2% compared to the previous year, with permits for single-family homes declining by 5.1% and for multifamily units by 3.7%.
It is evident that builder confidence index is reflected in actual construction starts and permit application numbers. There is a cautious and somewhat pessimistic outlook regarding the future in the next six months to a year. Consequently, as of May this year, five trends have emerged in American new residential construction:
Under President Biden's administration, the "Inflation Reduction Act" has expanded subsidies for green building materials and energy-efficient equipment. While this initiative may have been subject to modifications or cancellations during the previous Trump administration, it remains effective for the time being.
Moreover, due to high property prices, local governments are continuing to introduce affordable housing projects to alleviate the heavy burden of housing costs, especially in states like California, New York, and Massachusetts. However, builders still face challenges regarding the development of affordable housing, such as difficulties in obtaining land and low return rates.
Facing persistently high mortgage rates (nearing 7% in 2025), builders have introduced "Buydown programs" to stimulate sales. Major builders like D.R. Horton and Lennar provide 2-1 buydowns or temporary reductions in loan rates to entice buyers.
The 2-1 buydown scheme involves a mortgage interest rate discount plan where the rate is 2% lower than the original fixed rate in the first year, 1% lower in the second year, and returns to the initially agreed fixed rate from the third year until the end of the loan. The difference in the discounted interest is typically paid upfront by the seller or developer to alleviate the initial burden on the buyer.
Construction costs remain high, especially with steel, cement, and labor costs, leading many small and medium-sized builders to delay construction. In the southern and southwestern states like Texas and Arizona, projects are being postponed or scaled down. Extreme weather conditions, such as floods in Florida and wildfires in California, have also increased insurance costs, adding to the risks associated with projects.
Single-family home construction continues to face pressure from high interest rates, resulting in slower growth. Multifamily housing, such as apartments, remains a primary focus for builders, especially in urban areas or regions with high rental demand. To address the difficulty in buying homes, developers are constructing a significant number of new build-to-rent single-family homes, townhouses, or apartments.
According to the U.S. Department of Commerce statistics, the year-on-year growth rate of new home construction in the first quarter of 2025 was approximately 5%, with a significant contribution from multifamily constructions. This explains the surge in multifamily construction starts in April, aiming to alleviate affordability issues and reduce builders' costs by maximizing residential units on increasingly limited urban land.
Houston, Dallas, Phoenix, Orlando, and Atlanta continue to lead in residential construction volume across the U.S. Due to low land prices, rapid population growth, and loose regulations, these cities are favored for new developments. In contrast, California and the Northeast face limitations on construction activities due to land and regulatory restrictions.
In the post-pandemic world with a reshaped global landscape, housing usage space has been significantly affected. So far, housing designs have experienced the following prominent changes:
1. Reduction in the size of single-family homes:
During the pandemic period (2020-2022), individuals sought more space (WFH, Zoom Room), resulting in an average increase in new home sizes to over 2,500 square feet.
From 2023 to 2025, post-pandemic impacted by high interest rates and housing prices, builders have begun promoting small-space, high-efficiency designs. Compact 2-bedroom 2-bathroom single-floor homes and two-story small family residences have become popular products. Therefore, starter homes with smaller footprints are back in focus.
2. Open spaces:
Post-pandemic, while open-plan living and dining designs remain popular, there is now an increased demand for enclosed study or quiet areas for remote work or remote learning needs. Some projects have introduced features like "pocket offices" and "flex rooms" to allow family members easy access to working or studying spaces, adapting to the post-pandemic era's need to optimize smaller living spaces.
3. Multigenerational living:
To address the crisis of high housing costs, multigenerational homes have become a growing necessity for many families, with an increasing number of three-generation households, especially among Asian and Hispanic families. Builders have introduced layouts with secondary main suites or separate entrance suites, such as Lennar's "Next Gen" series.
4. Sustainable and smart homes:
Furthermore, environmentally friendly and smart homes have gradually become standard features in new constructions, partly due to government subsidy measures. As a result, more new projects are incorporating solar energy, high-efficiency HVAC systems, high-insulation windows and materials, smart locks, voice-controlled lighting, and various smart appliances. These homes are designed to be smaller yet more intelligent.
Analyzing the differences in new home construction by region, we can compare the states with significant Chinese populations such as California, Texas, Florida, and New York:
California: With expensive land prices, stringent building regulations, and high energy-saving requirements, small and energy-efficient designs with Accessory Dwelling Units (ADUs) are the trend in California. Most new residential developments in California take the form of townhouses or apartments, and standalone houses tend to incorporate ADUs or the possibility of future ADU additions.
Texas: Known for its vast size, Texas offers advantages in new construction with large living spaces, large lot sizes, and high cost-effectiveness. The state benefits from cheap land, loose regulations, and rapid development. Single-family homes remain predominant in terms of housing types, but due to escalating prices making it unaffordable for locals, developers are also heavily investing in build-to-rent properties.
Florida: Retirement living is a significant advantage in Florida, leading to retirement-focused architectural trends, emphasizing single-story residences and accessible designs. Most communities include various resident activity spaces, pools, catering to residents aged 55 and above, providing a leisurely retirement lifestyle.
New York: Centered around the New York metropolitan area, the construction of small-sized, high-density housing dominates in New York, mainly due to high urban land prices, strict regulations, and challenges in updating old buildings. As a result, most new residential developments in New York City are high-rise apartment complexes, characterized by innovative designs such as murphy beds and adaptable spaces. Suburbs and Upstate New York have a higher proportion of standalone new build projects.
After analyzing new housing trends from various perspectives, if you are considering purchasing a new home, what questions should you ask to focus on the most crucial points? These inquiries can generally be categorized into seven main groups: price and incentives, construction and quality, layout and design, environmental and energy considerations, community and location, finance and loans, maintenance and management.
1. Price and incentives: Understand the breakdown of property prices, what aspects are included in the price, such as land costs, what basic interiors are provided, and the importance of purchase incentives like discounted rates, transaction subsidies, or free upgrades.
2. Construction and quality: Inquire about the building materials and appliance brands used, the warranty periods for various structures like the roof and wooden floors, and the availability of upgrade options. Additionally, check if there are penalties or compensation measures in case of completion delays.
3. Layout and design: Determine the actual usable space, whether the square footage calculation includes the garage, basement, or storage units, assess if there is adequate space for a family, consider factors like natural light, ventilation, and expansion possibilities.
4. Environmental and energy considerations: Learn about the offered energy-efficient equipment such as solar panels, insulated windows, and HVAC systems, check for electric vehicle charging stations, and inquire about the heating, ventilation, and air conditioning system in place.
5. Community and location: Understand the amenities available within the community, the regulations, and associated costs, analyze the presence of security measures within the community, and examine external amenities like schools, supermarkets, and hospitals nearby.
6. Finance and loans: Inquire about the loan options provided by the builder, ascertain the property tax rates, understand the need for special disaster insurances like earthquake, fire, or flood, particularly crucial in high-risk areas.
7. Maintenance and management: Enquire about the maintenance of common areas within the community, who is responsible for landscape management, the homeowner association (HOA) fees, and community regulations such as restrictions on short-term rentals, pet policies, or exterior modification rules.
Despite the numerous factors currently challenging homebuyers, such as high interest rates, increased costs, and economic uncertainty, favorable aspects also exist. Factors like stable housing prices, numerous builder incentives, compliance with the latest building regulations, and smart home features should be considered by homeowners and first-time buyers seeking to seize the right purchasing opportunities.