Homebuilders expected a buying rebound that didn’t come.
Home Buyers Are Hiding
The Wall Street Journal reports Builders Are Offering Mortgage-Rate Discounts. Home Buyers Aren’t Biting.
America’s biggest builders are struggling to sell homes even when they offer buyers a 4% mortgage. Their experience suggests rate cuts alone won’t be enough to boost weak sales in the wider housing market.
The number of completed but unsold new homes has reached levels last seen in the summer of 2009, data from the Federal Reserve Bank of St. Louis shows. At the end of last year, builders were confident that sales would recover in 2025 and built tens of thousands of units to have enough supply for the spring-buying season. But demand didn’t pick up, and more homes sat unsold.
They have tried to use sweeteners to shift inventory. D.R. Horton (DHI) which builds roughly one in every seven new homes in the U.S. and has its own financing arm, is offering 3.99% mortgages to buyers. The company has also knocked 3% off its average selling price over the past 12 months and expects to cut prices further in its 2026 fiscal year, which runs through September.
America’s second-largest builder, Lennar (LEN) said it offered buyers incentives worth $64,000 on its average home sale last quarter to meet its sales target. A combination of subsidized mortgages and price cuts on offer from Lennar was equivalent to a 14.3% price reduction. The last time it had to offer home buyers such a deep discount was during the global financial crisis.
Profit margins have taken a hit from the rising cost of these incentives, so builders have decided to slow construction and wait for demand to recover. D.R. Horton only started building 14,600 homes over the three months through September, down 21% from its pace a year ago.
The number of unsold homes on builders’ sites varies a lot by region. The Midwest has no issue. But there is a glut in Texas and Florida, where looser building codes and strong population growth led to a burst of home construction. Markets where builders are struggling tend to be the ones where competition from existing homes is rising and everyone is competing for a small pool of cautious buyers.
But the problem is spreading to surprising places. The average number of finished, unsold new homes per building development in Southern California is five, double the rate this time last year, based on data from John Burns Research & Consulting. A rate of two unsold units per development is considered healthy.
New homes are becoming harder to sell in California for several reasons. Resale inventory is rising, and there has been a sharp pullback by foreign buyers—partly because changes to visa rules are making overseas workers wary of spending big sums of money on a home. The job market, especially for well-paid roles, has also slowed in California, Rick Palacios, director of research at John Burns, adds.
Unsold inventory of new homes is up 130% in Washington, D.C., compared with a year ago. Builders say the government shutdown and federal job losses are making buyers cautious and having an impact on housing demand.
New Homes For Sale By Stage of Construction
I have been discussing the above trends for months. But the last data we have is from August.
New Homes for Sale
- Total: 490,000
- Started Plus Completed: 395,000
- Finished: 124,000
All of the above numbers are the highest since 2008-2009.
I discount the total because it counts homes “for sale” that have not even been started In contrast, started homes represent a commitment. Ans completed homes a really big commitment.
Supply Rising, Demand Isn’t
Consumers are not biting despite huge discounts, including 4 percent mortgages.
Since 4 percent mortgage offers are not doing the trick, optimism on falling rates is more than a bit displaced.
Trump Proposes 50-Year Government-Backed Mortgages
Yesterday, I commented Trump Proposes 50-Year Government-Backed Mortgages, I Propose Something Else
The FHA head said the proposal is a “complete game changer.” Yeah right.
50-year mortgages are for fools.
A reader pointed out that people won’t stay in their house for 50 years. That is correct. But how long will they stay?
After 12 years of payments on a 50-year mortgage very little principle will have been paid back.
Here’s the exact comparison for a $400,000 loan at 6% fixed rate after exactly 12 years (144 monthly payments) on 15-year, 30-year, and 50-year mortgages.
| Term | Monthly P&I Payment | Total Paid After 12 Years | Principal Paid After 12 Years | % of Original Principal Paid | Remaining Balance |
|---|---|---|---|---|---|
| 15-year | $3,375.74 | $486,106 | $305,364 | 76.34% | $94,636 |
| 30-year | $2,398.20 | $345,341 | $134,978 | 33.74% | $265,022 |
| 50-year | $2,063.74 | $297,178 | $66,251 | 16.56% | $333,749 |
As many readers know I pretty much always disagree with and trash what Trump does or says. Not this time.
I can see a way for this to work for younger buyers, with the following strategy.
Save up the 20% for a downpayment to eliminate PMI. Then buy a solid, but cosmetically challenged home in a nice neighborhood with the lowest cost 50 year mortgage for a planned two year fix up. Then flip it as soon as the two years are up without a realtor or get your RE license.
The profit is tax free and you wash, rinse, repeat until you can buy your desired home without a mortgage. If you are unhappy with the lack of principal pay down? At any point you can always plow the savings into principal payments.
Younger people tend to move more often anyhow as they have fewer possessions and moving is not as cumbersome when playing the flipping game.
I’m not that old and I’ve already owned over 30 homes or farms… The biggest tricks are saving for the downpayment and buying right!
Children who inherited a house under prop 13, who use it as their prime resident, can retain a lower assessment up to $1M. Anything above $1M gets market price. Prop 13 can be retained if the owner bought a house in the same neighborhood or in the next township. A child or a grandchild, who lives in Atlanta, might move to SF if he or she inherited a house in SF from his parents or great parents. So, $1M is the cutoff.
Still priced way way too high. Stretching it 50 years won’t help at all.
Demand for slaughterhouses workers is high. Demand for pork/chicks and meat is growing. China is buying all the chicks/pork/meat we produce. Chinese pigs were hit with African swine fever. Chicks with safety concerns. They cut soybean orders, so we can produce more for export. Rare earth materials for chicks and pigs.
However, incentives make more sense taco’s suggestion of 50 year loans.
Why should people celebrate Xmas if Chuck will shut the gov after Dec 31.
Why should renters buy on the cusp of recession and lower rates in 2026.
See how much that government bill will cost you
https://civiccost-f7ec548b606c.herokuapp.com/
There are 6 homes in my neighborhood of 45-55 homes. The last home that sold in the neighborhood was in May 2025 and on the market for over a year. It seems everyone wants out at the same time. Price cuts and new listings are popping up in general around the county. It’s like someone flipped a switch. Surprisingly my next door neighbor want to move TO California.
Yet, the odd thing is that construction layoffs haven’t ticked up at all.
WHY NOT? Does that mean even more Americans have been displaced from construction jobs than in 2008, since illegals don’t show up in unemployment stats?
Very informative article, Mish.
Maybe many of the workers who were here illegally have left (rather by force (deported), or voluntarily (so as not to be deported), and therefore, citizens are taking the jobs left by the illegals and the unemployment rate is not dropping for those jobs (counting citizens only)?
Except they do because they’d show up as jobs lost in the sector? Christ you really are TWS.
That’s total BS. Illegal aliens are not given unemployment benefits which is one of the primary methods for determining real job loses.
Second, the BLS survey, yes the one that’s totally unreliable, does not ask for the legal status of those persons who are surveyed. So while it’s possible that some illegals are counted, the reality is that vast majority of illegals are NOT going to respond to an employment survey.
So, NO, illegals are by a wider margin not counted in BLS employment data.
The construction sector has been short staffed in forever with or without illegals. The median age for plumbers, electricians and carpenters is something like 55+ and it’s getting worse as young people don’t want to do those jobs.
https://aic-builds.org/skilled-labor-shortage-construction/
Trump removing 2 million workers or whatever number you want to believe will only make it worse. In a few years, you’ll be on your knees begging for immigrants to come wipe your butt or unclog your pipes (pun intended).
If the median age is 55+, it isn’t young illegal aliens that are doing those jobs anyway, is it? It’s funny how when illegal aliens were rounded up at a meat packing plant, that nearly 100 Americans applied to take their place.
I assume the owners and managers of the meatpacking plan were thrown directly into the slammer! Hahaha
If we deport enough illegals & we have enough people lose their jobs, then you’re going to see all sorts of people picking up hammers.
But I don’t thing every illegal is going to be deported. Far from it. What hopefully will happen is a immigration reform will happen, setting up a method for illegals to come out of the shadows into legal work.
But between now & them, I’m all for deporting as many as we possibly can, and no I won’t be begging for illegals to come back across the Rio Grande.
Haha, been waiting for that for 40 years.
And yet, wages remain a fraction of what they once were in that industry.
I stumbled on this explanation of SOFR, IOR and repo. It is an easy read and rather informative:
SOFR, IOR and repo? – by No1 – Gold and Geopolitics
This looks like a recession to me, and we may be headed much further down not just for housing, but the economy in general. With consumer confidence contracting as Mish discussed recently, people are not going to buy discretionary items, and they are going to be looking to cut costs and delay expenditures everywhere they can. Employment is not healthy either. Those are not characteristics of a healthy growing economy.
This may point out just how poorly the federal government politicians and federal reserve members have managed the economy. Running up a $38 trillion debt, most since Nixon removed the dollar’s last gold tie, is beyond foolish and reckless. The Greenspan put has shown the interest of the fed’s owner bankers is the real objective is the market and banker’s profits, not full employment of steady prices. There is no penalty for Fed failure, so they have done their malicious deeds with impunity. Citizen’s consequences for the foolishness may be just around the corner. We may be about to learn what can’t be paid will not be paid and those consequences will spill into the streets.
Don’t blame the politicians, blame ourselves. We allow for gerrymandering, therefore get uncompetitive seats in the name of taking care of “our side”. Without political competition, the pols simply take orders from their masters (corporations and the extremely wealthy) and cut taxes and promote policies that make corporations money at the expense of the citizen.
In the “good old days” (think of Archie Bunker times and the two decades before), the average blue collar worker could scrape by and survive and afford to send their kid to college. But, since Reagan (and “supply side” theories), we have been cutting taxes on corporations (in the name of promoting “growth”) and spending ourselves into oblivion. We need to get back to taxing the “owners” more and paying the “worker” more. And in order for that to happen, we (citizens) need to vote out all of these douchebags who have been in power all these years while this has happened, regardless of party. Corporations and the extremely rich will not be hurt by slight tax increases and paying their workers (citizens) a wage that allows them to get ahead.
And while I know Mish fancies himself a libertarian, I don’t think that health care and medicine is something that the “free market” exactly takes care of. A society ought to agree amongst it’s members (citizens) that medical care is one of those things that should not be the case that if you “can’t afford it” you can’t have it (It’s not a Ferrari after all). Depending on ones opinions as to why it has gotten so expensive, the government (on behalf of the society) should be increasing the supply of medical and health services (ie granting money to produce more Doctors, Nurses, and Health Professionals), thus reducing costs. Not subsidizing poor people to buy every more expensive insurance (because it is constantly subsidized)
You cannot vote them out. All you can do is vote against them.
Homes are overpriced. People can’t afford them on the salaries they are making. Everyone talks rates, but, prices surged 50 percent during the era of low rates (way too much), and will need to correct.
New home builders banked money for about 4 years, but that era is over and prices need to come down, or incomes need to rise in order to normalize the housing market.
Yes, rate cuts will help, but, a ridiculous 50 percent rise in prices in 2 years needs time to revert to the mean.
Overpriced is 10%, maybe 15%. The property market is the biggest bubble ever seen, this is Japan 1990, prices need to fall 75% & will.
I highly doubt million dollar homes will be going for 250k anytime soon. At the peak of the bubble the imperial palace grounds were worth more than all of california. This isn’t that.
Wait & see, you need to factor a stock market collapse, massive babyboomer selling from inheritors on death, mass unemployment.
The imperial palace argument is nonsense cuz it would never be for sale, look at regular housing in Japan that were bought in 1989 & the price in 1995-2000. It’s the same policies, same hyperbubble. Last time I looked a few years ago Japanese apartments still haven’t recovered.
the imperial palace is illustrative of the extent of the Japan bubble. It is used to demonstrate how stupid the comparison was and is.
It depends.
$1,000,000 home because the dirt it sits on is worth $900,000 (to somebody) or $1,000,000 because of how big / decked-out the house (new or old) itself is?
Somebody coming into even free possession of the latter will have to figure on normal maintenance costs all around and timing and cost of roof and HVAC equipment replacement, to name a couple of biggies.
An old house with galvanized steel water supply pipe and cast iron drainage pipe has a date with destiny, along with those with clay sewer pipe fitted with mortar joints below the old silver maple trees in the yard.
I don’t think it’s that bad, but, can only speak of my local market. I would say we are overprice by about 20 to 25 percent. And, I see many “average” homes dropping prices by around 10 percent right now, so, heading in the right direction. Should be back to “normal” within a couple of years.
I think it couldn’t possibly be worse, see my response to Ryan, it’s not easy to believe & I do not expect most to believe it. Just wait a while, the down cycle will last decades. Houses are for living in & not speculation, the speculation will die a horrible death.
In my local market (Houston, TX), housing was mainly flat from 2015 until the beginning of the pandemic, due to a retrenchment in the oil business after oil prices fell in 2014/2015. So, supply and demand were in balance and, for example in the suburb that I work most (3,000 +/- sf homes on 8,000 +/- sq ft lots), the average price per sq ft was around $117 for those 5 years. During the pandemic (late 2020 to early 2022), that price rose to $180 per sf of home. Once mortgage rates rose to 5.5 percent in the spring of 2022, prices have been flat. So, prices rose 50 percent in 2 years, but, if you took the prepandemic price and gave it a historical appreciation of 4 percent per year, we should be at $155 per sq ft.
So, while prices are still high compared to pre-pandemic, they are not that far from what they would have been had the low-mortgage rate boom not happened.
I think, at least in my market, prices will remain rather constant, with a slight bias to the downside, for the next few years, and that by 2028/2029 we will be “back on trend”, where peoples salaries can support that price for a home.
I think inflation has one more big run to go catching the central banks with their pants down & creating a crises, the decision to fight inflation for real this time or make the catastrophic mistake of cutting rates to fight rising unemployment still isn’t over.
great analysis. hopefully we get the opportunity we had in AZ in 2011 to purchase great cap rates on single and 2 and 3 family houses. fingers crossed.
Apparently the 50y mortgage has been received “negatively”
New proposals coming… portable mortgages, which can transfer to a new property, and assumable mortgages, which can be transferred to a property’s new buyer.
https://www.politico.com/news/2025/11/10/trumps-50-year-mortgage-plan-is-getting-panned-allies-blame-this-man-00645654?utm_medium=twitter&utm_source=dlvr.it
Yawn, desperation leads to insanity.
It is a good time to only need one move down in life, or none at all. Come to think of it, half an empty house may be worth more than all the repositioning for a move down… at least until the tide shifts
I would reply to your comment but I have no idea what the hell ya talking about. So as not to be rude I wanted you to know. Maybe write better next time.
New Home Sales BRIBES Are the Highest Since 2009 but Not Enough.
Van Halen – Not Enough (Official Video) [HD]
https://www.youtube.com/watch?v=dOrn7Pblr_8
Evictions and foreclosures are rising all over the United States and it’s not getting reported on from major news outlets.
https://www.youtube.com/watch?v=aQHFcXGVMH0
Buying a house into a recession is always a bad idea unless you’re rich and can wait it out or plan on living in the home forever.
I own rental properties and the math no longer makes sense. It’s not the mortgage, it’s all the other expenses that will eat you away: insurance, taxes, repair & maintenance, HOAs, disasters, etc. These costs will get worse as Trump deports the slave labor that keeps things running.
If things don’t change soon with all these other expenses, I may liquidate my real estate portfolio and invest in something else.
With Babyboomers on their way mostly to depth of hell millions of inheritors will be looking for a quick sale selling at bigger & bigger discounts to sell quickly. Inheritors in most cases will want to split the funds with siblings & are far less attached to a property while being far poorer, have record debts & facing unemployment. Ya talking about 30%+ of all homes coming to market in the next decade causing a massive flood & a massive collapse in prices.
True but boomers are concentrated in certain areas like Florida, Arizona and other southern states. Florida real estate is already a disaster for that reason.
Liquidate ya property before ya property liquidate you.
Don’t get into that undesirable scenario in the first place
What scenario? Sorry you do not make any sense.
No buts, Babyboomers are everywhere, maybe slightly higher in the states you named but they are everywhere & the collapse will be equal across the board. Wishful thinking & buts has zero value in the coming bloodbath, they all went up together & will fall together.
“Woocoodanoode?!”
The US educational system in full display here by Avery2.
You must have a PhD in Demography and Actuarial Life Insurance. Da Boomer dis, Da Boomers dat! What a surprise!
the oldest part of pax dumbfuckistan is new england and upper midwest. the SW is very young.