The U.S. housing market is sending conflicting signals, with new data revealing a sharp decline in construction activity that is expected to tighten supply, just as a recent Federal Reserve rate cut aims to stimulate demand.
The emerging affordability crisis is highlighted by a stark contrast: while government data indicate a slowdown, legendary investor Warren Buffett has been investing billions in major homebuilders.
Construction Slumps, Squeezing Future Supply
The latest New Residential Construction report from the U.S. Census Bureau painted a bearish picture for August 2025. Building permits, a key indicator of future supply, fell 3.7% from July to an annualized rate of 1.3 million, the lowest level since May 2020. This marks the fifth consecutive monthly decline—the longest negative streak since the 2008 Financial Crisis. Meanwhile, housing starts plummeted 8.5% for the month.
This downturn in new construction prompted a stark warning from The Kobeissi Letter, which stated, “This signals fewer new homes will be built, tightening supply further… Housing is set to …