Date: April 5th 2026

Time: 6:45pm

The Homebuilding Situation (Composite index measuring sales, inventory, price and mortgage rate direction change) Nationally from January (March Release) 2026 stands at 6.86 This is 93.14 points below the Average Situation for Homebuilders. The situation decreased by >13 points.

Regionally:

• Northeast Census Region stands at 134.4

• Midwest Census Region stands at 69.86

• South Census Region stands at -16.6

• West Census Region stands at 25.63

Sales

January sales fell to 48,000 units sold from 55,000 in December. 7,000 less than the average monthly sales rate across the last 52 years. January sales were down >-14% year over year.

Inventory

There are 472,000 new single family homes for sale . No change over the past month (revised). The past 18 consecutive months have been revised to remain range bound. Despite the 23% increase in Spec Homes for sale during the same time period.

Price Direction

Median Sales Price decreased year over year by -6.7%. The Median Sale Price for a New Home was $400,500. Prices have been declining for 40 months going back to October 2022.

Mortgage Rates

Mortgage rates decreased by -1.4% month over month. January’s average 30yr Fixed Mortgage Rate was 6.1%..

Additional Commentary:

This report contains builder earnings analysis, per share analysis of publicly traded builders, Lennar Earnings analysis, home price component breakdown and Crude Oil + Diesel price impact on new home sales. Comments and charts for those are below the Situation Component Charts (Figures 2-8).

Fig. 2

Fig. 3

Fig. 4

Fig. 5

Fig. 6

Fig. 7

Fig. 8

Publicly Traded Builders

Through the end of Q4 2025 and into Q1 2026 (both fiscal and calendar) builders continue to face difficult conditions to move product. Of the 13 builders measured for this segment, only 2 saw an increase in volume of home sales. Those being DR Horton and Green Brick Partners. Beazer Homes reported another loss, quarterly and saw the largest decline at -23% in home closings, while Tri Pointe had the smallest decline of -1%. The average decline was -6.9% year over year.

Fig. 9

As Figure 10 will show, none of those 13 escaped declines in net income. Removing Beazer from the pool (due to actual loss) the average decline in net earnings came in at -45% year over year. 61% (8/13) of Builders studied saw declines greater than -50%

Fig. 10

Going back to Mid 2024 highs, the average share price decline is -39%.

Fig. 11

Compared with an average -42% decline in Earnings Per Share (when excluding Beazer Homes) year over year.

Fig. 12

Net Margins have continued to decline as well. 5 of the same 13 builders have net margins < 5% while 10 have net margins below 10%. Lennar for Q1 2026 reported it’s lowest net margin in 11 years.

Fig. 13

Figures 14-16 will show the largest of these builders year over year change metrics. There should be no surprise if we see another -5-10% share price reduction for big builders by May.

Fig. 14

Fig. 15

Fig. 16

Lennar Earnings

Lennar’s Fiscal Q1 2026 average sales price came in at $374,000. $16,000 below it’s 2025 Annual Avg. Price point, and fully back to prices last seen in 2017. 9 years of price impairment heading into what will be another difficult spring market.

Fig. 17

Net Income came in at the lowest since Q1 of 2019 with $225 million.

Fig. 18

Net margins were compressed to the lowest in 11 years going back to 2015.

Fig. 19

SG&A costs (selling, general and administrative) were nearly 3 times net earnings, clocking over $600 million. Most of this has come as incentive and buydown spending.

Fig. 20

While those expenses have helped keep closings relatively apace, the bottom line is trending the opposite direction. Figures 21-23 will show trend lines in spending, income (both gross and net) as well as delivery vs backlog changes.

Fig.21

Fig. 22

Fig. 23

Active Community Count for Lennar remains near all time highs. 2024 saw huge increase in community opens, while 2025 added to those via the Feb. 2025 closing on the acquisition of Rausch Coleman Homes (Fig. 24). The same time Lennar spun off land holdings to Millrose.

Fig. 24

Home Price Components

While Lennar may have lost public pricing power on the sale side of homes, they maintain the power to push what pricing components they can lower. Lennar is the 2nd largest publicly traded home builder in the United States. They represent nearly 12% of home sales market share by volume of sales as of 2025. Figure 25 compares the costs of building, such as land and construction costs vs additional incentives and sales price of 3 other builders (shown in order of increasing build costs). Only DR Horton (The largest publicly traded builder in the US) is building for lower construction/lot costs.

Fig. 25

To further highlight Lennar’s ability to push pricing downward on hard costs, despite its record high $62,700 per home incentive spending, Figure 26 will show a sample of costs over 5 years. Since 2022, build costs have been pushed down by -18%. These costs savings come from a combination of:

• lower cost of lumber and building products

• lower cost of fuel

• lower cost of trade partner pricing

That last component is effectively shifting some margin compression from Lennar to it’s smaller skilled trade partners. Too much push however can have serious impact on Lennar’s ability to deliver timely product and thereby earnings, as smaller firms cannot withstand the margin compression in the same fashion large builders can. Firms under $15m in revenue have vastly different access to credit and capital than larger firms, and an outsized share of the trades companies building America’s homes operate well under that revenue figure.

Fig. 26

To further illustrate those build costs, we’ve pulled from internal files to show similar tract build cost components. Those are shown as dollars in figure 27*, and as percent of build cost in figure 28.

Fig. 27

*Depending on location, concrete/foundation and excavation/site work costs can vary greatly. This is due to regional code requirements, weather and subsurface soils that create conditions ranging from “scrape and pour” (often with post tension slabs) to excavation 4’ below grade at minimum, with concrete footings and frost walls. In areas where these costs are less, they can often be replaced by higher costs of cladding including tile flooring, stucco exteriors, and tile roofs.

These figures represent the breakout of what goes into building a tract home. They include finished lot costs (after turning raw land into buildable lot in a new neighborhood), utility connections, permits, and unless noted separately, turn key trades such as MEP’s (mechanical, electrical and plumbing). Turn key suppliers provide both material and labor for projects. 2-10 Warranty represents an insurance program commonly used by builders, to insure statutory warranty requirements can be met in the event they are unable to.

Fig. 28

Using these nearly identical build cost components to Lennar, we can break down and compare projects, both in reported earnings format vs what you’d look at developing said project internally in figure 29.

On the right of Figure 29, we pulled from Lennar’s 10-K, to analyze what that $62,700 in incentives looks like compared to our internal client project file.

Lennar separates their SG&A into two categories: Corporate and Non Corporate. Corporate represents costs such as their construction manager, accounts receivable/payable salaries, office portion allotment etc. Whereas non corporate accounts for commissions, special marketing, and for some builders: buy downs.

Though in the case of Lennar those can also be represented in the separate “incentive” category. This comparison clearly shows the impact of those additional cost, while trying to maintain pricing, delivering a lower margin than the project on the left which sold for nearly $50,000 less.

Fig. 29

While the internal project represents a nearly $50,000 price savings, on a monthly cost basis supposing:

Lennar buys down rates to 4.1% vs 6.1%, using 80% LTV ($273,200 vs 312,576 financed) the $390,720 purchase, principal and interest only payment would save $145 per month for the buyer vs buying at $341,500 at 6.10%. Suffice it to say, the market is challenged.

Fig. 30 shows regional incentives offered by Lennar in specific communities.

Fig. 30

That additional spending isn’t the only thing delivering diminishing returns though, as share repurchases are doing less in the way of returning more net earnings, as shown in figure 31.

Fig. 31

Crude Oil, Diesel and Regulations

With the current environment of escalating prices of diesel, which is used to transport all manner of construction materials, and on job site build equipment, we took a look at the last 40 years of diesel prices overlaid onto new home sales. Higher diesel prices correlate to lower new home sales volume, both as the price per gallon rises and more so as it spikes. This is illustrated in figure 32, with orange dotted horizontal bars showing sales rate changes as diesel is elevated. It becomes even more smoothed when crude prices are overlaid on the US Homebuilding Situation Index as shown in figure 33. Both figures show Jan sales conditions as published vs up to April oil/diesel prices.

Of significance, a large portion of builder communities exist in new ring/outer ring/further out locations to city centers. This helps reduce costs, however extends commute times for perspective buyers. While gas and diesel prices escalate, this may further weigh on “consumer” sentiment taking into account increased monthly gas expenses for commute vs any savings from buy downs (and from higher rates than Q4 25/Q1 26) or incentives.

Fig. 32

Fig. 33

While diesel is creating a headwind for builder’s spring season, lumber prices are still 88% higher than their 46 year average price of $316 per 1,000 board ft. vs last Thursday’s closing price of $596 per 1,000 board ft.

Softer spring demand may help lower lumber costs for the remainder of the year beyond Q2.

Fig. 34

Options for industry participants

Builders can and will be looking to change up product selections and supplier bases for savings in build costs wherever possible. Less upgrades and more closing cost/price reductions may be more attractive to spring buyers.

Trade Partner Contractors can evaluate necessary overhead, supply chains, and operational efficiencies to reduce costs while maintaining margins. For those in the right positions, turn key solutions can present new revenue and better overall margins. For others still, shifting from turn key to labor on;y can also present potentially preferable returns.

Suppliers can continue to look for volume pricing discounts where possible, alternate materials, and altered payment terms.

Brokers can look for increased commission splits from new build communities if the home fits their client’s needs. Many builders are currently offering broker luncheons, community tours and larger commission splits as a means to gain new buyers. They can also potentially help their client’s navigate negotiable pricing in the right new build communities as well as closing cost assistance.

US Property Services is a contracting and consulting firm, specializing in construction management, cost estimating, construction risk mitigation and research. For information on this publication, specialized research or a consultation, you can contact us at:

info@uspropertyservices.com

The method and research for the index can be found here.

The next Situation Index will be published in May 2026 after the US Census Bureau Survey of Construction is released. Until then:

Date: September 25th 2025

Time: 7:00am

Today marks the 1 year anniversary of the very first published US Homebuilding Situation Index. In that time, the index has lead the way, as a leading index should, from seeing the situation deteriorating in Q4 2024 to seeing the rise of the August 2025 sales all ahead of when “analysts” and “Consensus” could imagine. But then again, when you’re scanning the horizon as you drive, you see and react differently than when you’re staring at the pavement in front of the hood. Just drive down your local highway en route to work, and you’ll notice the traffic jams form at bends and hills for no particular reason, other than not seeing whats more than 2 feet in front of the car.

Or, go ahead and layout a new house from foundation to finish, while keeping it flush, plumb and level, with a string, tape measure, pencil/notepad and your own wallet. Spacial awareness required.

This report contains analysis of Lennar’s most recent Earnings, and compares Lennar’s Fiscal Quarter Earnings to the US Census Bureau Survey of Construction data.

The Homebuilding Situation (Composite index measuring sales, inventory, price and mortgage rate direction change) from August 2025 stands at 28.97 This is 71.03 points below the Average Situation for Homebuilders. The is the best situation since April 2024.

Sales

August sales jumped to 66,000 units sold from 56,000 in July. 11,000 more than the average monthly sales rate across the last 52 years. Sales made up 66.85points for the index, up from 64.

I believe this warrants a special note: from what I see, from analysts in the space to everyday friends, this number doesn’t seem to garner the attention it deserves. 50-60,000 sales in one month, is roughly equivalent to the size of an entire 5th ring suburb (pick your MSA) in new homes sold every month. The number of new homes sold in one year, the lowest year of the current cycle (2022) saw 641,000 new homes sold. That’s 4,000 fewer homes than the entire population of Detroit Michigan. 2020’s 822,000 new homes sold, is the equivalent of the population of San Francisco California. No seasonal adjustment necessary.

Inventory

There are 490,000 new single family homes for sale . Down 14,000 over the past month (revised). The past 12 months have been revised to remain between 490,000-505,000. Last months 508,000 was revised down to 504,000. This is currently the most inventory in recorded history outside of the two years from November 2005-October 2007. Current inventory contributed -53.5 points to the index. The average number of new home for sale every month, since 1971, is 319,000. In other words, current inventory is 53% above average. After downward revisions.

Sales do not include cancellations, which have been elevated this year. Current “speculative” inventory, consisting of completed homes for sale and lots with specific permitted homes for sale have reached 228,000 units , down 2,000 units month over month. This is within 15% of the all time high spec inventory.

Publicly traded builders b(u)y and large increased community count this year, increasing permitted spec homes for sale. Lennar was a leader in community count growth at 29% Year over year increase in active communities as of last week’s Q3 earnings report.

On a community count level, Lennar has: 381 more communities at the end of their Q3 2025 Fiscal year than they had at Q3 End of Fiscal Year 2024.

The number of homes for sale may, and should, statistically speaking, increase again.

Price Direction

Median Sales Price increased year over year by 1.9%, ending 7 consecutive months of negative slide. The Median Sale Price for a New Home was $413,500. The past 5 months received revisions to pricing, including bringing the new cycle low price of $395,100 in July, tying August 2024 for second highest negative YOY change in price this cycle.

Mortgage Rates

Mortgage rates decreased by -1.9% month over month. August’s average 30yr Fixed Mortgage Rate was 6.59%. Comparatively, August 2007’s 30 year average mortgage rate was 6.57%.

Additional Commentary:

Lennar Earnings and public doubt

This month, I’ve witnessed multiple industry analysts question the validity of the Census Bureau’s Survey of Construction data. Mostly questioning this months (by mostly I mean only) units sold number. These are the same people who ignored the signs of growing inventory, increasing COGS (cost of goods sold), increasing SG&A (selling, general and administrative costs), increasing cost of money (mortgage rates) and increase of publicly traded builder commentary highlighting stress over the last two years, in favor of the narrative that, “the housing shortage will never end and home sales will only ever increase”.

I’m only slightly exaggerating the last phrase, and under whelming the prior realities.

I find it curious, that only now, do these folks question the published data. And of all the data, only the recent sales data. Which, if you’ve read this report, you expected, because I told you to, that August would see a sales bump. And September also won’t be nearly as bad as “word on the street” says it will. All while missing the coldest quarter of them all, if they’d just look beyond the pavement in front of the hood to see where Quarter 4’s bend in the road takes them.

Especially when that’s the least questionable form of the data reported.

Take for instance, in the last 12 months, the Census Bureau, with zero explanation other than “times were tough don’t judge us”, altered the median sales price of new homes data collected, going back to 2020. Erasing over $50,000 in gains to the previously reported Median sales price.

When I publicly challenged that, analysts responded to me “the builders didn’t report that big of an increase”. Nevermind that I literally worked for then the 10th largest publicly traded builder, and witnessed it first hand, day in and day out, let’s let Lennar “reporting” vis a vis earnings, compared to the Census Bureau’s sales by Conventional Finance type. Which makes up >75% of sales.

By the way, Lennar just erased 7 years of price gains. With Avg. Sales price back to 2017/18 levels.

I guess everyone forgot about that, since this is the new “official” monthly sales numbers:

Even though the monthly high price in November 2022 for all purchase types was $496,500 median sales price.

Just a reminder, Lennar is so large, they make up the same footprint in sales as the 3rd, 4th, 5th and 6th largest builders in the United States. (Pulte, NVR, Meritage, KB Homes) by themselves.

Nevermind the 12 months of “units for sale” revisions to stay within that 490-505k range, despite Lennar’s deliveries being “Up and to the right”.

Nevermind the publicly acknowledged previously shared here “incentive wars” ongoing by builders.

Nope, today, the analysts question August being a strong sales month. I guess they’re all just looking at the pavement in front of the hood.

They probably also missed that Lennar has officially eclipsed the > $1 in SG&A Cost for every $1 in Net Income Earned bit too.

Which means they definitely lost the plot after telling me “The debt load is great” while Lennar went from net positive Cash and Cash Equivalents to net negative vs their Debt.

The same people tell me that “Opendoor” has gone parabolic in recent weeks.

If they say so. Speaking of which, Lennar was an early investor in

What’s Opendoor you ask?

All of which means:

They’ve lost money every quarter of their existence, save for 2 quarters. Someone get them a string, tape measure and a notepad. Plumb, flush and level.

Then again, Lennar benefits from “technology” company investments losing money, to reduce tax burdens. While they have them.

While Lennar and “NAHB” sentiment continue to plummet, I look forward to seeing what the industrious smaller builders, local developers, and bigger hungry builders do in the coming months.

And don’t shed a tear for Lennar, even if their worst is yet to come. They’ll be fine. The Situation just improved, even if the “consensus” says otherwise and even if temporarily. The last time the situation improved by this much, was April 2008. Remember, the improvement comes from stopping that which makes the situation unhealthy.

For those who proscribe to “consensus” housing data, “The beatings will continue until moral improves”

Build your own path.

I want to express my gratitude, on this occasion to the people who helped make this anniversary possible, you know who you are.

And a very special thank you to the 1k+ readers here.

A note: The Federal Reserve Federal Funds Effective Rate does not set mortgage rate targets.

The research and method for the index can be found here: US Property Services

Charts

Sources:

• US Census Bureau: Survey of Construction; New Residential Sales

• Lennar Public Earnings, 10-Q/Press Releases/Quarterly Presentations

• US Property Services (All Rights Reserved)

• Analysis by Ulysses Awsumb

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Date: August 28th 2025

Time: 7:40pm

The Homebuilding Situation (Composite index measuring sales, inventory, price and mortgage rate direction change) from July 2025 stands at 1.89 This is 98.11 points below the Average Situation for Homebuilders. The situation increased by 2 points.

This report contains builder earnings analysis and Price Targets for 20 Metropolitan Statistical Areas, as well as the index.

Sales

July sales fell to 56,000 units sold from 57,000 in June. 1,000 more than the average monthly sales rate across the last 52 years. Sales made up 64 points for the index.

Inventory

There are 505,000 new single family homes for sale . Up 2,000 over the past month (revised). The past 10 months have been revised to remain between 490,000-505,000. Last months 511,000 was revised down to 503,000. This is currently the most inventory in recorded history outside of the two years from November 2005-October 2007. Current inventory contributed -58 points to the index.

Sales do not include cancellation rates, which have been elevated this year. Current “speculative” inventory, consisting of completed homes for sale and lots with specific permitted homes for sale have reached 230,000 units (Completed units revised down).

Publicly traded builders by and large increased community count this year, increasing permitted spec homes for sale. Lennar was a leader in community count growth at 29% Year over year increase in active communities.

Price Direction

Median Sales Price decreased year over year by -5.9%. The Median Sale Price for a New Home was $403,800, down month over month after revisions as well. The past 4 months received revisions to pricing.

Mortgage Rates

Mortgage rates decreased by 1.4% month over month. July’s average 30yr Fixed Mortgage Rate was 6.72%.

Additional Commentary:

Builder Earnings

Q2 Earnings have been released for the majority of the 20 largest publicly traded homebuilders. Amongst the 16 builders analyzed, the average Net Income change on a same quarter year over year basis was -36.6%. The biggest change was -101.2% as Beazer Homes reported an operating loss. Rounding out the bottom 4, K Hovnanian saw net income decline -80%, Century Communities -58% and Lennar -50%.

Only 2 saw increase in earnings per share. American Homes for Rent and Taylor Morrison. Only American Homes for Rent saw increased net income on the same basis.

The average Net Margin for Builders analyzed came it at 8.9%, with Beazer Homes in negative territory and American Homes for Rent at 23% Net Margin. The only builder to exceed 15% net margin.

The combination of prices and rates present a challenging environment for builders, as two years of incentive to transact become heavy, compressing margins further. 10 of the 16 builders had single digit Net margins. 7 of which were below 7%.

While August likely provides a modest boost to closings for the seasonal strengths the month offers, the remainder of the year could see further sales stalling.

Builders will welcome the recent 19% decrease in lumber futures, bringing cost back to spring level, and should look for ways to further compress costs as an alternative method to induce sales and avoid operational losses in major markets.

Price Targets

A study of the same 20 Metropolitan Statistical Areas (MSAs) and Cities used for the S&P Global Case Shiller 20 City Home Price Index reveals much of the battle builders have faced reducing prices and increasing selling and general administrative (SG&A) cost for 2 years, to balance sales beyond their current bounding on average.

The 20 MSAs comprise a total population of 112,594,464 people as of the 2023 US Census American Community Survey (ACS). This should not be confused with marketshare or households.

The Median Household Income for these 20 MSAs was $89,515 with ranges from $67-127,000. By using a 25% DTI (Debt to income) ratio, Median Price targets have been calculated for two sales methods. (25% of monthly income used to approve mortgage).

Those two methods consist of:

• Conventionally financed buyers with down payments of 25% of purchase price

• FHA financed buyers, with 3% of purchase price down payments

For Conventionally financed buyers in these areas, the overall Median Price target is $390,144, supposing buyers have a $97,536 down payment. (

For FHA, the overall Median Price Target is $301,658 with a down payment of $9,049.

To further highlight the conventional finance decline ($494,500 Median Price to $403,800) over two years, the average time to save the required down payment, if one were to save the exact mortgage payment long enough for the required down payment, is 52 months.

To further expand sales targets using FHA, Median Price Targets should expect to decline as much as another $103,000 unless and until both incomes increase, and or rates decrease. Dramatically.

A note: The Federal Reserve Federal Funds Effective Rate does not set mortgage rate targets.

The research and method for the index can be found here: US Property Services

Charts

Sources:

• US Census Bureau: Survey of Construction; New Residential Sales

• Freddie Mac Primary Mortgage Market Survey

• Public Builder Earnings, 10-Q/Press Releases/Quarterly Presentations

• US Census Bureau American Community Survey

• US Property Services (All Rights Reserved)

• Analysis by Ulysses Awsumb

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Date: July 25th 2025

Time: 7:00am

The Homebuilding Situation (Composite index measuring sales, inventory, price and mortgage rate direction change) from June 2025 stands at -1.6. This is 101.6 points below the Average Situation for Homebuilders. The situation decreased by 10.8 points. The current level stands among the worst recorded by the index.

This report contains builder earnings analysis as well as the index.

Sales

June sales fell to 54,000 units sold. 1,000 less than the average monthly sales rate across the last 52 years, a 3.5% decline month over month, and 25 point decline year over year.

Inventory

There are 511,000 new single family homes for sale . Up 10,000 over the past month (revised). The past 9 months have been revised to remain between 490,000-501,000. Of Note: inventory to 511,000 units for sale on both a seasonally adjusted basis and non seasonally adjusted basis. The most inventory since October 2007, which saw 518,000 units for sale. It should be noted, this is currently the most inventory in recorded history outside of the two years from November 2005-October 2007. This is one month in reverse to the prior matched high of November 2007. June 2006 was the all time peak inventory month at 570,000 units for sale. The current inventory is 88+% of that record. Sales do not include cancellation rates, which have been elevated this spring. Current “speculative” inventory, consisting of completed homes for sale and lots with specific permitted homes for sale have reached 89.6% of the all time record high. Said another way, there is currently less than 10.4% of inventory to hit market before matching the all time high of inventory available.

Price Direction

Median Sales Price decreased year over year by 2.9%. The Median Sale Price for a New Home was $401,800, down 4.9% month over month as well. The past 4 months received revisions to pricing.

Mortgage Rates

Mortgage rates increased by .02% month over month. June’s average 30yr Fixed Mortgage Rate was 6.82%.

Additional Commentary:

The Last time we sat at this level of inventory, mortgage rates were 6.38%. (Oct 2007) vs 6.82% in June 2025. The Median Sale Price in Oct. 2007 was $234,300 vs $401,800 (71% increase).

The end of Q2 2025 for 6 of the 7 largest publicly traded homebuilders to report earnings (less KB Homes) was particularly challenging financially. On a 3 months ending “Spring Quarter” Year Over Year basis:

• 5 of 6 Builders reported decreased Gross Revenue. #1 Builder by sales volume DR Horton saw the largest decrease.

• 3 of 6 reported declining closings (completed sales) for the Q with Pulte Homes fairing the worst and Taylor Morrison fairing the best

• All 6 reported declines in Net Income. Averaging -27.3% declines. Lennar (2nd largest by closings) faired the worst at -50% decline, and Taylor Morrison faired best at -2.9% decline.

• Earnings Per Share Declined on average -23.%. Lennar lead the declines at -47% while Taylor Morrison was the only builder to see an increase at 2.6%

• All 6 reported negative year over year share price changes. The worst being a -3.2% decline by Taylor Morrison. However when compared to the 52 week high share price, all 6 reported massive declines. Average decline was -27% per share price, while Lennar marked the worst at -39% from its 52 week high.

• While much discussed, Gross Margins are a relatively useless metric outside of setting pricing for Goods and Services sold. Net Margins however, represent an accurate depiction of what percent of revenue, a company retains as actual earnings. To that end, all 6 reported Net Margins under 15%. 3 of 6 under 10% with Lennar, the 2nd largest builder in the country, posted a 6.1% net margin.

• Every 1% increase of SG&A (Selling, General and Administrative cost) as a percent of Gross Revenue is equal to an average of 11% decline in Net Income based on current Quarterly reports.

• All 6 bought back shares en masse during the Quarter.

Earning Report Quotes

Meritage Homes -4.6% Gross, -36.6% Net Revenue

Pulte Homes -4.1% Gross, -24.8% Net Revenue

Lennar -6.4% Gross, -50% Net Revenue

DR Horton -7.4% Gross, -24.3% Net Revenue

NVR -3.3% Gross, -16.8% Net Revenue

Taylor Morrison +2% Gross, -2.8% Net Revenue

At some point, even Taylor Morrision will have to choose one: margin or sales volume. Gross Increase and Negative Net is still: Net Negative.

Based on US Household Median Income, the threshold to meet half the potential market of buyers, at current mortgage rates, Median Sales price target is $280-300,000 maximum, on a national basis.

August and September have a chance to bounce slightly given historic patterns for the Situation Index, though without signifigant changes, Q4 in 2025 could be worse than Q4 of 2024, which set a record low.

The research and method for the index can be found here: US Property Services

Charts

Sources:

• US Census Bureau: Survey of Construction; New Residential Sales

• Freddie Mac Primary Mortgage Market Survey

• Public Builder Earnings, 10-Q/Press Releases/Quarterly Presentations

• US Property Services (All Rights Reserved)

• Analysis by Ulysses Awsumb

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Date: June 25th 2025

Time: 9:00pm

The Homebuilding Situation from May 2025 stands at 9.01 This is 90.99 points below the Average Situation for Homebuilders. The situation decreased by 10.21 points, or 53% from the prior month.

Sales

May sales fell to 56,000 units sold. 1,000 more than the average monthly sales rate across the last 52 years, a 22% decline month over month, and 9% decline year over year.

Inventory

There are 502,000 new single family homes for sale . Up 5,000 over the past month (revised). The past 8 months have been revised to remain between 490,000-502,000. Revisions of Note included revising inventory to 507,000 units for sale on a seasonally adjusted basis. The most inventory since November 2007, which saw 508,000 units for sale. It should be noted, this is currently the most inventory in recorded history outside of the two years from November 2005-November 2007. June 2006 was the peak inventory month at 570,000 units for sale. The current inventory is 88+% of that record. Sales do not include cancellation rates, which have been elevated this spring.

Price Direction

Median Sales Price increased year over year by 3%. The Median Sale Price for a New Home was $426,600, up month over month as well. The past 4 months received revisions to pricing.

Mortgage Rates

Mortgage rate increased by 1.35% month over month. May’s average 30yr Fixed Mortgage Rate was 6.82%.

Additional Commentary:

The Last time we sat at this level of inventory, mortgage rates were 6.21%. vs 6.82%. The Median Sale Price in Nov. 2007 was $249,900 vs $426,600 (71% increase).

The Median Household Income in Nov 2007 was $50,230, at a 25% DTI ratio this left room for debt payment of $1,046. Or $175.36 monthly, short of safely paying for the Median Priced new home at the time. Nominally. In Real terms, the same borrower could cover $262 in excess of the principal and interest payment at 20% down payment.

In May 2025, the Median Household income is $80,610. Using the same DTI and down payments, the current median household is $556 short of covering the payment for the Median priced New Home. Or 25% short of being capable of making the payment.

Reverse engineering that payment structure, at current rates and prices, the Median Home price target for builders, to account for Principal, Interest, Taxes (at $3,012 according to CoreLogic) and Private Mortgage Insurance, the Median Price target for builders should be $288,522. or 32% below where it is today.

That’s all considering qualifying credit, and sufficient lack of other debt service payments required.

KB Homes and Lennar recently reported earnings, both have seen large declines in net income and margins, albeit taking different directions. Lennar is lowering prices, increasing sales and forsaking margin for the sake of continuing to grow their enormous footprint and maintain volume (sales cures all ills for business).

KB is cutting land acquisitions and saw price increases of 3%. Their sales decreased.

Q3 and Q4 have potential for large margin compression and layoffs, if conditions do not improve materially. Publicly traded builder earning report season is around the corner, the more debt service, and SG&A increase these builders face, the harder the situation will be for them. Even if the Homebuilding Situation improves.

A side note: Builders tend not to consider existing inventory competition. The target areas are either expansion in and of outer ring exurbs or master planned communities, with a smaller percentage of communities in longstanding suburbs, with a small footprint in CBD surrounding areas. Buyers however, may begin to see that differently if builders can’t meet payment terms favorable to buyers as they have. The race to cut seems to have begun.

He who cuts first, cuts best.

Today, FHFA Director Bill Pulte signed a directive to consider crypto assets for mortgage qualifications. In light of the cost burdens, and assets allowable to qualify the median household for a mortgage payment to buy these homes: Bitcoin does not solve this.

The research and method of the index can be found here: US Property Services

Date: May 27th 2025

Time: 10:00am

The Homebuilding Situation stands at 20.3 This is 79.7 points below the Average Situation for Homebuilders. The situation improved by 1.6 points from the prior month.

Sales

April saw a 3 year high of 68,000 units sold. This is the most sales since February 2022. March’s 69,000 sales were revised down by 9+% to 63,000 sales. This is an abnormally large revision downward from the Census Bureau. None of these take into account increased sale cancellations. Both builder earnings and Redfin have reported increased cancellations through May 2025.

Inventory

There are 497,000 new single family homes for sale . Down 3k monthly on revised March numbers The past 7 months have been revised to remain between 490,000-497,000. March revisions of Note included revising inventory to 500,000 units for sale on a non seasonally adjusted basis. The most inventory since November 2007, which saw 508,000 units for sale. It should be noted, this is currently the most inventory in recorded history outside of the two years from November 2005-November 2007. June 2006 was the peak inventory month at 570,000 units for sale.

Price Direction

Price decreased year over year by -1.95%. The Median Sale Price for a New Home was $407,200, up from month over month. March price was revised from $403,600 to $403,700. The past 4 months received revisions to pricing.

Mortgage Rates

Mortgage rate increased by 1.12% month over month. April’s average 30yr Fixed Mortgage Rate was 6.73%.

Additional Commentary:

The Current contraction in favorable conditions for homebuilding has now lasted longer than the decline in conditions prior to the 2007-2009 Recession. The Homebuilding situation reached its trough at -7.15 in December 2007 as compared to the current lowest reading -15.84 in November 2024.

It remains to be seen if the trend of improvement continues. There are 3 factors that will weigh heavily moving forward:

• Price Contraction

  • While pricing has declined for 30 months now, the median sale price will likely contract further through the year to move inventory.

• Spring Starts

  • The inventory started during spring at peak sales months may not be absorbed as quickly. March and April sales are historically higher, but the 3 year high mark this April is likely an anomaly given mortgage rates.

• US Bond Market

  • Measuring economic cycles by days from first raise of Federal Funds rates, we have reached the cyclical average time frame for bond rates reducing, which would in turn lower mortgage rates. Given the turmoil in markets, any reductions in rates may come when market sentiment has already shifted to demanding lower actual pricing.

  • Additional items to keep an eye on are the Government’s responses to the current situation. Director of Federal Housing Finance Agency William Pulte (of the Pulte Homes family) has become a vocal critic of Federal Reserve Chair Jerome Powell over Federal Funds Rates (which do not set mortgage market rates) and has publicly stated his desire to create new incentives through Government Sponsored Enterprises for homebuilders. GSE’s such as Fannie Mae, Freddie Mac as well as Govt. Entities like FHA. It should be noted, the Director has a longstanding Fued with the current executive team in place at Pulte Homes, and used DR Horton as a recent example of builders that “need help”. DR Horton being the largest homebuilder in the Nation. Potential actions may not have the intended consequences desired.

One additional item to note, that market analysts seem to ignore at their own peril, that has large carry cost implications for builders, is the number of “Spec Homes” (speculative) that have yet to be started. These are 100% completed lots, that have a SPECIFIC home tied to the lot via permit at the local building office. As in, these are speculative builds, and only that home plan as permitted may be constructed on the lot. This number had already surpassed the pre “GFC” crisis level, but just hit a 35% year over year increase since last April.

This keeps the market within 12% of the all time record of Spec homes for sale in the US.

Where is the pain being felt? In Net Income to the largest builders. Q1 earnings and non calendar Q2 earnings reports have all pointed to decreased net income.

A 10% decline in sales at $4.5B requires an increase of 5% Gross margin to maintain income. As in 25% of $4.5B translates to 30% of $4.05B.

Continued increase in SG&A (Selling, General and Administrative) costs as incentive use ranging from: forward rate buy down purchases, closing cost assistance, to outright COGS categorized as incentives such as free upgrades/finishes put further pressure on builders

Increases in SG&A are not a 1:1 in Net Income, as seen in DR Horton Earnings. $DHI increased SG&A from 7.2% to 8.9% which translated to an in increase of 3.7% in cost.

The overall decrease in earnings per share was >26%.

In future publications I will explore the the earnings in greater detail.

The Homebuilding Situation may be improving, but the market negative effect on builders may only be getting started. Watch for more reports and conversations regarding lot supply and cost reduction efforts in the near future from the industry.

The Method and Research for the index is available Here:

https://www.uspropertyservices.com/homebuilding-situation-index

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Date: April 25th 2025

Time: 9:15am

The Homebuilding Situation stands at 18.17. This is 81 points below the Average Situation for Homebuilders. The situation improved by 6 points from the prior month.

Sales

March saw a 3 year high of 69,000 units sold. This is the most sales since February 2022.

Inventory

Current new single family homes for sale remained at 493,000 units. Down 1k monthly. The past 6 months have been revised to remain under 500,000 units on a non seasonally adjusted basis. In February, the seasonally adjusted rate remained above 500,000 units, at 503,000. The most since November 2007 which saw 508,000 units for sale.

Price Direction

Price decreased year over year by -7.5%. The Median Sale Price for a New Home was $403,600. The past 4 months received revisions to pricing.

Mortgage Rates

Mortgage rate decreased by 2.5% month over month. March’s average 30yr Fixed Mortgage Rate was 6.65%

Additional Commentary:

Public builders posting quarterly results have left the margin compression conversation and entered the reduced income conversation. Leading the way, DR Horton, the Nation’s largest builder not only saw sales declines, but pre tax profits were cut by over 30%. Chart below.

Beazer Homes saw drastic reductions in Net Income. The chart below will speak for itself.

Taylor Morrision saw net sales decrease 8% while Pulte saw 7% decrease. Pulte joined DR Horton with a 22% decline in Net Income year over year. Pulte had been fairing better than most until recently.

The carnage in Homebuilder stocks has slowed pace, albeit the drop has been precipitous thus far, with #2 builder Lennar seeing a 52 week low in share price equating to a 48% loss in share value. If the trend continues of decreased Net Income, the share value and market cap on the publicly traded builders will likely fall even further.

Each builder reporting has made light of “constrained affordability” for buyers. Until and if the price of money comes down, expect the actual price of product to be in the crosshairs to keep pace moving forward. Especially if the -7.5% YOY price change along with incentives moved sales pace to new highs. This may signal the start of a “race to the bottom” in pricing, to grab market share and maintain declining revenues.

Vendors and Subcontractors should expect to see requests to share in the cost reduction efforts across the board.

Builders with product in the sub $370,000 range will likely be per community count sales leaders, and Smaller builders with product mix targeting entry home pricing in their markets should begin to see opportunity to compete with the larger builders in their markets as operating cost pressures mount for their larger peers.

The more inventory moves, the more the Homebuilding Situation will improve, even if it means the balance sheet situation for big builders worsens.

The Method and Research for the index is available Here:

https://www.uspropertyservices.com/homebuilding-situation-index

DR Horton Income

Beazer Homes Income

Pulte Homes Income

Lennar Share price. See 52 Week Range.

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Date: March 25th 2025

Time: 7:30pm

The Homebuilding Situation stands at 14.12. This is 85.88 points below the Average Situation for Homebuilders.

Sales

February Sales improved moderately to 59,00 units. 4,000 sales more than the monthly average over 53 years.

Inventory

Current new single family homes for sale remained at 494,000 units. The past 5 months have been revised to remain under 500,000 units on a non seasonally adjusted basis. In February, the seasonally adjusted rate broke 500,000 units. The most since November 2007.

Price Direction

Price increased on a year over year change level by less than 1%. The Median Sale Price for a New Home was $414,500. The past 4 months received revisions.

Mortgage Rates

Mortgage rate decreased by 1.6% month over month. February’s average 30yr Fixed Mortgage Rate was 6.8%

Additional Commentary:

Public builders posting 1st quarter results have reported compressed margins, compressed sales numbers and have lowered guidance. The 20 largest publicly traded builders have seen more than $79 Billion dollars of share value wiped out in the last six months. The average per share value loss is 34%. The 10 year treasury is up in March on a month over month basis.

Additional charts this month show:

• the record months of spec homes as well as record months of backlog for sale.

• 500,000 New Homes For Sale

• The Record holding months of Spec home inventory

• The per share and dollar value loss in stock share value of the 20 largest public builders.

In February 2007, the Index level was 1.49, which improved to 14 before plunging to -7. Sales in February 2007 were 68,000 units vs 59,000 in 2025.

Builders will need to see prices cut or extreme rate buydowns meet the $330,000 price target to materially improve the situation and clear inventory.

Small builders, may begin to have room to capitalize if they can hit these targets and begin to grow, while larger builders begin to strain cash from operations and holding costs.

The Method and Research for the index is available Here:

https://www.uspropertyservices.com/homebuilding-situation-index

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Date: February 27th 2025

Time: 5:00pm

The Homebuilding Situation stands at 9.49. This is 90.51 points below the Average Situation for Homebuilders.

Sales

January Sales improved moderately to 56,00 units. 1,000 sales more than the monthly average over 53 years.

Inventory

Current new single family homes for sale remained at 496,000 units, with December 2024 receiving a revision downward from 496,00 to 489,000. This is 87% of the record number set in 2006. There are 227,000 Spec Homes for sale. 85% of the record set in January 2008 and the most available since July of 2008.

Price Direction

Price increased on a year over year change level by 3.7%. The Median Sale Price for a New Home was $446,300

Mortgage Rates

Mortgage rate increase by 3.6% month over month. January’s average 30yr Fixed Mortgage Rate was 6.9%

Additional Commentary:

Builders will need additional incentives and price cuts to move inventory fast enough to start clearing the inventory buildup. Margin compression will continue until the Situation improves. Builders who can and do build product at the lower price ranges between $250-335,000 have an opportunity to increase market share as this would serve the Median buyer income profile. The lowest Average home price of the ten largest builders is $376,000.

Additional charts this month show the record months of spec homes as well as record months of backlog for sale.

Additionally one chart compares the index to the spec home inventory.

The Method and Research for the index is available Here:

https://www.uspropertyservices.com/homebuilding-situation-index

Date: January 27th 2025

Time: 7:30pm

The Homebuilding Situation stands at 7.98. Up from a record low, that was even lower off data revisions. November Level -15.5 vs pre revision -14.68

Sales

December Sales improved from 45,000 to 52,000

Inventory

Current single family homes for sale climbed to 496,000 units. The exact number for sale in December 2007.

Price Direction

Price increased on a year over year change level by 2.1%

Mortgage Rates

Mortgage rate increase by 1.3% month over month wiped out half of the sales gain basis.

Homebuilding Situation

We have reached December 2007 levels of New Units for sale and climbing. The Record was set in August of 2006. Given public builder executive comments looking for spring sales, and the pace at which inventory is growing, matching the record high is possible. We are at 87% of the record currently.

Additional Commentary:

Builders will need additional incentives and price cuts to move inventory fast enough to start clearing the buildup. Compressed margins are likely.

For all the new readers, the Method and Research is available Here:

https://www.uspropertyservices.com/homebuilding-situation-index

Time: 2:30Pm

The Homebuilding Situation sets a new record low at -14.69

Sales

November sales stayed suppressed from October, at 19+% below the average sale volume of 55k units, down to 45k units sold. This is the second consecutive month where sales were under 50k units.

Inventory

Current single family homes for sale hit 493k homes. This is 155% of average inventory for sale across all categories, not started, completed and under construction. Inventory continues to build.

Price Direction

Price direction trended down yet again by 6+% year over year. Further pressure is mounting on price direction to the negative side.

Mortgage Rates

Mortgage rate increases have been relentless since the Federal Reserve cut interest rates. Rates continued to rise into November.

Homebuilding Situation

Builders are facing an uphill battle going into the final month of the year. The combination of elevated inventory, decreased sales, rising interest rates and depressed pricing will likely lead to some further industry turmoil in 2025, as the pace of delivering units remains elevated. I discussed last month the news of Lennar acquiring Raush Coleman Homes. From the previous index email:

“Details have yet to be released but I can easily see this being a $1-2B merger, likely in the $2-500M cash range with stock share. Rausch’ average unit sale price does fall within the means of affordability to the Median Household Income level, so this is a potential net positive all around.”

The details that have been published include $900 million being funded into Lennar’s new “Millrose” REIT, to be used to acquire the land owned by Rausch Coleman over time.

Speaking of the new REIT (Real Estate Investment Trust), Lennar is moving land off it’s balance sheet into a new entity, that will be a standalone company unnassociated with Lennar and managed by an external third party. It’s my opinion this is a move to get holding costs off the books as the homebuilding situation becomes more challenging.

Additional Commentary:

Sales were revised going back to September and units for sale also received slight revisions.

With rates up, sales down, inventory rising and the last week of December mostly vacation time, the year may just end lower than the current new record low.

The next report will be the the January 2025 mid month report. A note, the US homebuilding situation will be moving to a new publication. Details to come soon.

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