Cash in the bank does not mean you are profitable. We often hear phrases like "we have to feed the machine" or "we are going to gap out," but we rarely ask if we have too many lots in a pipeline that the market can no longer absorb. If you are a builder looking at the start of 2026, the numbers are not just wobbly. They are a warning.
This instability is driven primarily by homebuyer economic concerns. These concerns are fueled by approximately 20.8 million layoffs over the last 12 months, which is roughly 12.23% of the total labor force.
Home price growth since 2020 continues to outpace incomes significantly. Nationwide, prices have increased 35% to 45% compared to median household income growth of only 20% to 24%. This has resulted in a 15% to 20% decrease in real purchasing power. These pressures are reflected in the University of Michigan Consumer Sentiment Index, which currently sits at 47.6. This is a record low since the survey began in 1952. When consumers are pessimistic about their economic outlook, they do not buy houses.
Mortgage rates have not provided the relief some analysts expected. At the end of March, rates ranged from 6.31% to 6.45%, down only slightly from the 6.65% to 6.76% range seen a year ago. Significant relief is unlikely because mortgage rates are driven mainly by 10-year Treasury yields rather than the Federal Reserve's overnight rate. Even if the Fed lowers benchmark interest rates, it will likely have no noticeable effect on the mortgage market.
Furthermore, rising oil prices are expected to create significant inflationary pressure on all goods. This will drive the overall inflation rate up, making it difficult for the Federal Reserve to lower interest rates to boost employment. They are currently facing a no-win situation.