January 2026 Public Affairs Update
IDA has launched Public Affairs Updates to provide timely insights on legislative, regulatory, and industry-related issues. These updates are designed to keep you informed and prepared as the industry evolves.
2025 Is In The Books…. What Lies Ahead?
With the start of 2026 behind us, and data coming in to get a full picture of the construction market from last year, we can get a better idea of the outlook for the coming year. There is reason for optimism, even if it is tempered with some questions.
What is happening with interest rates, which impact construction project financing and home mortgage affordability? What about housing permit and new starts? How does the resale market for existing homes look? Has remodeling rebounded? What about growth in the nonresidential construction markets? First off, here is a look at some key figures from 2025.
Interest Rates
Long-term mortgage interest rates in the US have been declining recently, and 2025 came to a close at 6.19%, the lowest average level since September of 2024. This reduction had the most immediate impact on existing home sales, but it will take rate reductions below the magic 6% mark to truly spark new home sales.
According to NAHB Economist Catherine Koh:
“Falling lower mortgage rates have started to translate into gains as existing home sales edged up slightly in November. However, this increase remains limited as mortgage rates above 6% are still considered elevated. Nonetheless, as financing costs continue decline, more households are likely to reenter the housing market. An NAHB analysis shows that a 25 bps reduction in the 30-year mortgage rate, from 6.25% to 6.00%, could bring approximately 1.1 million additional households back into the buyer pool.”
Looking ahead, absent other unexpected impacts, NAHB expects continued lowering of the long-term mortgage rates with the 30-year rate projected to average 6.17% in 2026 and reach 6% by 2027.
The market to borrow money for construction and development is trickier to navigate, but there is some optimism on that front. A recent analysis published by Capital Analytics Associates highlighted the complexity of the financial markets for building.
CAA author Mirella Franzese notes:
“Heading into 2026, Federal Reserve interest rate policy is setting up a pivotal year for U.S. development as the industry adjusts to a higher-cost capital environment and begins to emerge from a prolonged holding pattern.”
Navigating volatile building materials and labor expenses while managing interest rates is key to success for development in 2026 and beyond.
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Residential Building Permits Activity Slows
Building permits for single-family homes have shown continued weakening into the 4th quarter of 2025. This drop was partially offset by an increase in multi-family permits; whether that shift away from single-family construction continues will be watched closely. Regardless of the market split, NAHB reported this month that the cooling in permits indicates a slow start for 2026.
“In October, single-family building permits weakened, reflecting continued caution among builders amid affordability constraints and financing challenges. In contrast, multifamily permit activity remained steady and continued to perform relatively well. Together, these trends suggest that while demand for new housing persists, builders are adjusting residential construction activity in response to evolving market conditions. Because permits typically precede construction starts, these patterns offer insight into the near-term outlook for residential building activity.
Over the first ten months of 2025, the number of single-family permits issued nationwide reached 787,122. On a year-over-year basis, this represents a 7.0 percent decline compared with the October 2024 year-to-date total of 846,446. Multifamily permitting activity was stronger, with 426,352 permits issued nationwide, marking a 5.7 percent increase from the same period last year.”
Another interesting data point is the shift in new home sizes, often linked to mortgage rates. The size of new single-family homes has been falling since 2015 in response to overall affordability conditions. Note that in 2021 new home size increased as interest rates reached historic lows, but home sizes trended lower once mortgage interest rates increased in 2022 and 2023. That trend can have a double impact on the door industry: fewer homes with smaller garages. Smaller garages can mean fewer- and smaller garage doors.
According to data from the Census Quarterly Starts and Completions by Purpose and Design (and NAHB analysis), median single-family square floor area through the third quarter of 2025 was 2,176 square feet, a reduction for new single-family homes estimated at 2,405 square feet in the beginning of 2025.
Existing Home Sales
The National Association of Realtors reports that 2025 showed a 1.4% increase in existing home sales accompanied by a 0.4% increase in the median sales price at $405,400.
“2025 was another tough year for homebuyers, marked by record-high home prices and historically low home sales,” said NAR Chief Economist Lawrence Yun. “However, in the fourth quarter, conditions began improving, with lower mortgage rates and slower home price growth. December home sales, after adjusting for seasonal factors, were the strongest in nearly three years. The gains were broad-based, with all four major regions improving from the prior month. Inventory levels remain tight,” Yun added. “With fewer sellers feeling eager to move, homeowners are taking their time deciding when to list or delist their homes. Similar to past years, more inventory is expected to come to market beginning in February.”
The wild-card for 2026 will likely be interest rates as buyers and sellers balance their home sales with their home searches. How this plays out will have a direct impact on the remodeling industry.
More importantly, the Trump administration is looking into ways to impact existing home sales by looking at institutional buyer limitations, mortgage bond purchases, and regulations aimed at increasing the mortgage assumption option that once was a mainstay in home financing. These initiatives could impact new and existing home sales.
Remodeling Expected to Soften Later in 2026
From the Harvard University Joint Center For Housing Studies by Rachel Bogardus Drew:
“Annual spending on improvements and maintenance to owner-occupied homes is expected to gradually slow through 2026, according to our latest Leading Indicator of Remodeling Activity (LIRA). The LIRA projects that year-over-year growth in home renovation and repair spending will be 2.9 percent early this year before easing to 1.6 percent growth by the end of the year.
Single-family home sales and permitting activity have picked up modestly from very low levels, which should support a nominal increase in remodeling activity this year. Even with some deceleration later in the year, overall annual homeowner spending on improvements is expected to reach $522 billion by the end of 2026.
Remodeling trends closely track the health of the broader housing market. If interest rates begin to ease, that could provide a much-needed boost to both housing construction and retail sales of building materials, which for now continue to pose significant headwinds to homeowner improvement spending.”
Nonresidential Construction Spending Expected to Soften in 2026
From Construction Dive:
“Nonresidential construction spending stayed flat month over month in October and was down almost 1% year over year, according to an Associated Builders and Contractors analysis of U.S. Census Bureau data.
The construction spending report was the first since November due to the government shutdown, and showed relatively little change from recent spending patterns near the end of the 2025.
“Nonresidential construction spending failed to gather momentum at the start of 2025’s third quarter,” Anirban Basu, ABC chief economist, said in the report. “While there are few sources of private nonresidential growth outside of the still surging data center category, much of the recent decline in construction spending is due to a precipitous drop in manufacturing investment.”