So, housing starts jumped 6.2% in December. That sounds like good news, right? The headline number, measured at a seasonally adjusted annual rate of 1.40 million, certainly looks constructive at first glance. But the folks at Bank of America (BAC) Securities aren't buying it. They point out the market is still down 7.3% from a year ago, and they argue that one month's increase doesn't do much to change the bigger, less cheerful story of a residential construction slowdown.
Here's the thing: the real problem is single-family homes. That segment carries most of the weight, accounting for roughly 70% of total starts. And it fell 9% year-over-year to 981,000 units. Multifamily construction did see a solid monthly rebound, but it was still down 3% annually. BofA's take is pretty straightforward: as long as single-family activity is under pressure, the broader housing market is likely to stay soft. Short-term swings in apartment building just don't move the needle enough.
The data gets even messier when you look at it region by region. A 37.4% monthly surge in the West looks dramatic—until you see the South down 16.1% and the Midwest down 13.2% compared to last year. BofA flags these sharp divergences as a perfect example of why the top-line monthly figure can be misleading. It reinforces their cautious, maybe even skeptical, read on what's really happening.
If you want a cleaner story, BofA says to look at permits. While total permits edged up 4.3% from November, the details are telling. Single-family permits dropped 10.9% year-over-year, even as multifamily permits surged 15.5%. That widening split, in BofA's view, confirms the single-family pipeline is firmly under stress. It's not just about what's starting today, but what's planned for tomorrow.
The mood on the ground isn't great either. The NAHB confidence index fell to 36 in February, well below its long-term average of 51. More than a third of builders cut prices, and 65% offered sales incentives. Yet, buyer traffic and present sales stubbornly remain below breakeven. Builders are trying everything, and it's still not quite working.
Looking ahead, BofA's projections are modest, to say the least. They see single-family starts declining another 2% in 2026 before a very modest 2% recovery in 2027. Total starts are expected to reach 1.37 million in 2026 and 1.41 million in 2027, with multifamily construction carrying much of the load. Sure, there are some welcome signs—mortgage rates easing to 6.1% and MBA purchase applications rising 9.1% year-over-year. But BofA is careful to frame these as early signals of stabilization, not the start of a meaningful recovery. The message is clear: don't mistake a bit of calm for a new boom.
