Housing starts are down in most of the country. Here's why the Northeast is the exception

By some estimates, the U.S. needs several million more homes to ease its housing shortage. But the pace of homebuilding has been slowing down.

Housing starts, the number of new homes that began construction, are down 2% nationally through July, compared to last year. Every U.S. region but one has seen a decline in starts so far in 2026.

The one exception: The Northeast. There, housing starts are up nearly 12%, and new home sales are up too, also bucking the national trend. While the region is seeing continued homebuilding activity, it’s not exactly a boom.

The region’s steady pace of building is on display in Milton, Vermont, a small town about 25 minutes from Burlington, the state’s largest population center. Eventually, 32 homes will be nestled into a development called Dogwood Circle. Now, it’s a work in progress. Seven homes are finished; the owners are already living in them. Three more are under construction. The rest of the lots are still patches of dirt. But that was set to change soon on a recent September morning.

“We're going to begin digging tomorrow a duplex next door to this,” said developer Collin Frisbie, president of Sterling Homes, as he stood in the basement of one of the under-construction units.

The new neighborhood is a short walk to the town’s rec field and library. By New England standards, it’s a fairly dense development: 32 units on six acres.

“The more homes we can fit on a piece of land, the more we're able to divide out all those costs: the land costs, the infrastructure costs, the development costs, the permitting cost,” Frisbie said.

That helps lower the price for buyers. Still, the least expensive home in Dogwood Circle — half a duplex — will set you back $480,000, Frisbie said. Not exactly cheap, but that’s a good bit below the median price in Vermont.

And units are selling, Frisbie said. But despite a persistent housing shortage in the state, his business isn’t booming. It’s kind of just chugging along.

“It's a reasonable, rational market at the moment, and that's a good thing,” Frisbie said. “Markets tend to ebb and flow. We're closer to an ebb.”

The Northeast’s homebuilding market is staying afloat thanks, in part, to the region’s demographics, according to Robert Dietz, chief economist with the National Association of Home Builders.

“Who has benefited from the run-up in not just home prices, but stock prices? Well, it's older households,” Dietz said. And the Northeast has a lot of older households. “So, it's those households that have seen an increase in their net worth that have relatively greater spending power for the housing market.”

That’s pushing up demand for new homes in the region, and helping the Northeast’s building market look a bit better than the rest of the country.

“You're basically seeing us doing OK relative to where we were a few years ago,” said Paul Willen, a principal economist at the Federal Reserve Bank of Boston, “whereas, I think in other parts of the country, they've seen a big falloff.”

Coming out of the pandemic, homebuilding boomed across the South and West. But as borrowing rates for builders and buyers rose, that boom came to a halt.

Meanwhile, “we didn't see that construction boom in New England and in the Northeast,” Willen said. “So, in a sense, I guess you could say we're playing catch up.”

That catch-up is slow going, however, for a few reasons. Homebuyers and builders face the same elevated rates. Plus, construction costs are particularly high in the Northeast, Willen said. And compared to other regions, the Northeast just doesn’t have as much space for new homes.

“We can't just find a thousand acres of farmland, and just go in and dig sewer lines and build streets and build hundreds of new homes,” Willen said.

Instead, you’re more likely to find smaller developments, like the 32 units in the works at Dogwood Circle. Even those face another headwind that developers say makes building in the Northeast especially hard: state and local permitting processes.

Developer Collin Frisbie said it took two and a half years to get permits for his new neighborhood, and that was “lightning speed,” compared to some other projects he has in the works.

“The conservative approach to how some of these regulations are being interpreted makes it much more difficult to provide that housing that is more affordable to more people,” he said.

Frisbie cited, for example, local rules around setbacks that make it harder to build at the density required to keep prices in check. He did not face that issue at Dogwood Circle, however.

For Julie Maslack, one of the first buyers in the new development, the increased density in the new neighborhood came with trade-offs.

She bought one of the new homes after living for years on a large, rural lot in a nearby town. There's not nearly as much space at Dogwood Circle to garden, and for now she's surrounded by construction. But “I also thought about things as I age,” she said. “What if I can't drive? I could walk to the library, I could walk to the rec fields, I could walk to trails, dog park, get my food, all of that.”

She’s also planning to spruce up her new yard. “I put in flowers. I'm going to put in a fence, and then I'll build a little paradise in the backyard.”

And she’ll watch as the rest of the neighborhood builds up around her.