U.S. residential permitting fell further behind its pre-pandemic trajectory through July as builders pulled back from new projects, raising the prospect of a thinner supply pipeline even as the country faces a housing deficit that Zillow estimates at 4.7 million homes.
More than 1.42 million residential building permits were issued nationwide during the 12 months ending in July, down 1.7% from the previous 12-month period, according to a Zillow analysis. Permitting was 19.4% below the level implied by the 2016-to-2020 trend, the widest gap this decade.
Permitting has declined on a year-over-year basis for 44 consecutive months. The pullback follows a pandemic-era construction surge and comes as higher inventories in some previously fast-growing markets make additional projects harder for builders to justify.
“Builders are responding to a softer market by pulling back, especially in the places they’d been building the most,” Zillow senior economist Kara Ng said. She cautioned that the underlying housing shortage remains and that a smaller construction pipeline could tighten supply if buyer demand strengthens.
The slowdown is concentrated in several Sun Belt markets that were among the most active during the pandemic-era building boom. Permitting fell 25.3% in Austin over the past year, the largest decline among major markets analyzed by Zillow, followed by a 24.1% drop in San Antonio.
Construction activity moved in the opposite direction in several coastal and Midwestern markets where development had been more subdued. Permits more than doubled in San Jose, rising 122%, while Seattle increased 35.8%, Birmingham 32.9%, Los Angeles 30.6% and San Francisco 29%.
Those percentage increases come from markedly different construction bases. Los Angeles recorded 34,696 permits over the past year, compared with 61,275 in Dallas and 59,214 in Houston.
The weaker pipeline follows a third consecutive annual decline in detached single-family home completions. Builders finished about 817,000 such homes in 2025, down 2.5% from 2024 and the lowest total since 2020, though still 4.4% above 2019.
Builders are also reducing home and lot sizes as affordability pressures shape new construction. The median detached home completed in 2025 measured 2,300 square feet, compared with 2,400 square feet in 2019, while the median lot declined to 8,700 square feet from 9,000.
Construction times have improved as pandemic-era supply disruptions receded. The median detached home completed in 2025 took six months to build, one month less than during 2022 and 2023.
Zillow argues that greater residential density could help address the estimated 4.7 million-home supply deficit. More than 300,000 vacant lots were listed on the company’s platform in June.
The analysis also found a pricing divide based on property condition. Homes marketed as move-in ready sold for 2.9% more than expected, while fixer-uppers sold for 14% less, suggesting buyers are placing a premium on properties that require little immediate work.
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