US Homebuilder Confidence Falls to a Five-Month Low

Factors Pressuring the US Housing Market: Affordability and Costs

Low housing affordability remains the main constraint. Mortgage rates are near their lowest levels in recent months, yet they are roughly double where they stood in 2021. For many prospective buyers, this represents a barrier that limits demand for new construction.

NAHB Chairman Buddy Hughes said most builders continue to use incentives, including price adjustments, but a significant share of potential buyers is still unwilling to enter the market. At the same time, demand for remodeling and renovations remains solid, as homeowners prefer upgrading existing properties rather than moving — a trend linked to limited household mobility.

In February, 65% of developers used sales incentives, ranging from discounts to mortgage rate buydowns through upfront payments. The share of companies reporting price cuts fell to 36%, the lowest level since May. This suggests an effort to sustain transactions without broad price reductions.

Bloomberg Intelligence analyst Drew Reading noted that incentives and gradual shifts in mortgage rates could support sales over the course of the year. However, housing affordability initiatives proposed by the Trump administration remain a source of uncertainty.

Policy Shift on Housing Investment: What the White House Proposes

President Donald Trump announced plans to ban large institutional investors from purchasing single-family homes. The statement, posted on social media, led to a decline in the shares of asset managers and other real estate firms. Further details are expected to be presented at the World Economic Forum in Davos.

Following the 2008 financial crisis, major funds including Blackstone and Pretium acquired homes at discounted prices and converted them into rental properties. Critics argue that this model reduced the supply available to individual buyers. The specifics of the proposed ban have not yet been disclosed, and implementing such a measure would require legislative action and could face legal and lobbying challenges.

Potential Impact on the US Housing Market

The overall effect of a ban may be limited. According to SFR Analytics, the 24 largest owners of single-family rental homes control about 520,000 properties — roughly 3.5% of all rental homes in the US and less than 1% of the total single-family housing stock. Their activity is concentrated primarily in Sun Belt cities, while their presence in high-cost Northeastern and California markets is significantly lower.

Some experts warn of unintended consequences. Institutional investors often serve as a buyer of last resort for developers, providing liquidity that supports new construction. Restricting this segment could slow housing starts and add upward pressure on prices. Alternatives under discussion include tax incentives to encourage sales to individual buyers and temporary support measures to facilitate transactions in a higher-rate environment.

Home Sales Outlook and Demand Structure

The index measuring expected sales over the next six months stood at 46 and has remained below the neutral threshold for a second consecutive month. Developers are not factoring in a rapid market rebound.

Indicators of current sales and buyer traffic have been in negative territory for at least a year, pointing to a prolonged slowdown. Elevated borrowing costs and overall price levels continue to restrain new contracts.

Sentiment weakened in nearly all regions, with the South — the largest homebuilding region in the US — being the exception. Even stronger demographic trends there do not alter the broader national picture.

Analysts at International Investment say the sector is in an adjustment phase: transactions are being supported by incentives, but a sustained recovery in underlying demand has yet to emerge.