(TNND) — The momentum is weakening in the homebuilding market, though activity remains more robust than before the pandemic.

Zillow reported that single-family home permitting dropped 6.3% in the first half of the year.

And that might contribute to the long-term national housing shortage.

America’s housing deficit has grown to nearly 4.7 million homes, according to Zillow.

Housing supply is incredibly uneven from place to place, Zillow Senior Economist Orphe Divounguy said.

“In many markets, the large increase in resale inventory is causing builders to pause,” Divounguy said Friday via email.

Existing home inventory has climbed to a six-year high, he said.

Builders are adjusting to higher inventory and softer sales, but they haven’t hit the brakes entirely, Divounguy said.

Homebuilding saw a rebound last year.

Even with the drop so far this year, permitting activity remains 16% above pre-pandemic levels.

More than half of the 50 largest metros are still permitting more homes than their pre-2020 average, according to Zillow.

Jeff Ostrowski, a housing market expert for Bankrate, said some markets are suddenly flush with housing because demand drew a lot of builder activity over the last few years.

“So, maybe two or three years ago you wouldn't have said there's a lack of supply in Toledo or Topeka or Cleveland. But interestingly, the Rust Belt and the Midwest are the places where home prices have really been going up over the past year because of a lack of supply,” Ostrowski said. “And then conversely, the formerly hot markets in the Sun Belt, Florida and Texas in particular, have had a lot of new construction. And so, now there's plenty of supply. And so, that's why there's been some softening of prices in those places.”

Zillow said that among the largest 50 metros, Jacksonville, San Antonio, Boston, Denver and St. Louis have seen the largest pullback in total single-family permits issued in the first six months of the year.

Meanwhile, Kansas City, Orlando, Cincinnati, Pittsburgh and Oklahoma City have seen the largest increase in total single-family permits issued.

Home prices overall are still going up. The National Association of Realtors said the median price of resell homes was $435,300 as of June, a record for the month and the 24th consecutive month of year-over-year price increases.

The Census Bureau said the median price of a new home in June was $401,800, which was actually down about 3% from a year ago.

Either way, Ostrowski said builders have had a very good run in recent years.

But he said builders have been very cautious since the Great Recession.

New home construction bottomed out in 2011, with only around 585,000 completions that year.

Home construction has inched up every year since, reaching 1.6 million last year for a level that was more in line with the years before the Great Recession.

“Builders made up some ground in 2024, but we’re far from out of the woods,” Divounguy said.

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Zillow also reported that new homes are shrinking.

The average size of new single-family homes shrank to 2,100 square feet, down 100 square feet from the year prior and 200 below the pre-pandemic average, according to Zillow.

Lot sizes for new homes have also fallen to an average of 6,300 square feet, now 1,100 square feet smaller than in 2019.

And the construction of condos and townhomes is outpacing the construction of detached, single-family housing.

Ostrowski said all of those shifting dynamics reflect the higher cost of land and the higher affordability challenges for home buyers.

Ostrowski said family sizes are also shrinking.

And homebuilders say they’ve gotten better at designing houses, making the smaller spaces more efficient.

“The argument would be that today's 2,000-square-foot home is just more functional than a 2,000-square-foot that was built in 1980,” Ostrowski said.