New residential housing construction momentum continued cooling in August, with permits under pressure nationally, particularly in the South and West. Builders are managing inventory tightly while awaiting further Federal Reserve interest rate cuts to hopefully revive demand, with Midwest markets standing out as relative outperformers. Many buyers remain sidelined by affordability woes, as elevated mortgage rates and high home prices crush demand, and a softening labor market now adds to the challenges. 

A team of Goldman analysts, led by Susan Maklari, penned a note on Tuesday that provides a heat map for the nation's housing market, showing that falling housing permits signal the real estate market shifted into a lower gear. Builders are more cautious in late year, buyers are waiting for the Fed Chair Powell to unleash another round of interest rate cuts, and home price growth has stalled. The Midwest is holding up, but the South and West markets are softening the fastest. 

Here are the key takeaways from Maklari’s note on the national housing market outlook: 

"Instead, buyers are waiting out the potential for further Fed rate cuts while increased concerns around employment give some pause, especially in the entry-level. Given conditions and greater flexibility as cycle times shorten, builders are looking to enter 2026 with less inventory, suggesting permits will remain under pressure through year-end, at least. We also note completed single-family specs are at their highest level since July 2009," Maklari wrote in the note. 

Geographical breakdown:

Trailing 12 Month Single-Family Permits by State

Trailing 3 Month Single-Family Permits by State

Permits for Top 50 Cities

Zillow Single-Family Home Value Index

Goldman’s note on the cooling real estate market comes the same day Case-Shiller data for July (read report) showed national home prices declined for the fifth straight month.

As we highlighted in our report, home price changes tend to track closely with bank reserves at the Fed on a six-month lag, and this only implies prices could decelerate in the new year following a brief rebound. 

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