Residential Building Permits Drop, Sparking Inventory Shortage Concerns Amid Affordability Woes, Zillow Says

03:43 PM EDT, 09/14/2026 (MT Newswires) -- The pace of residential building permits in the US fell further below its pre-pandemic trend line in the year ended July, triggering concerns about an intensifying house shortage amid ongoing affordability headwinds, Zillow Group (Z, ZG) said Monday. Nationally, more than 1.42 million permits were issued over the 12 months through July, down 1.7% year over year and running a record 19.4% below the trend line before the coronavirus pandemic, according to the real estate marketplace. Permitting in Austin, Texas, tumbled 25% over the past year, the biggest drop among major US markets. Permits more than doubled in San Jose, California, the report showed. The number of detached single-family homes built in 2025 decreased 2.5% year over year to roughly 817,000 units, marking a third consecutive drop, according to the report. "With permitting at a post-pandemic low, the housing shortage at the root of today's affordability crisis could deepen," Zillow said. Homebuilders are completing projects more quickly and preferring smaller homes that are more affordable. This holds especially true in markets where builders had been building the most, Zillow Senior Economist Kara Ng said. "That's an understandable reaction to today's conditions, but the housing shortage that drove the building boom is still very much intact," Ng added. "The concern is that when conditions improve and buyers return, the thinner pipeline could mean a tighter market that drives up prices." Last week, a report by the National Association of Realtors showed that US existing home sales in August hit the lowest level since June 2025 amid persistent affordability headwinds. Separately, Zillow said home sales fell annually last month as high mortgage rates dampened buyer demand and pushed more prospective buyers into a strengthening rental market. Price: 33.17, Change: +0.67, Percent Change: +2.06