Builder confidence has plummeted to levels not seen since the early days of COVID-19, when we were all still figuring out whether we needed to sanitize our mail. The latest National Association of Home Builders sentiment index paints a grim picture of an industry caught in limbo.
I've been tracking housing trends for years, and this one feels different.
The problem isn't just that builders are pessimistic – it's why. They're stuck in a no-win situation: construction materials cost more than ever, qualified workers are scarce as hen's teeth, and mortgage rates have potential buyers doing double-takes at their loan estimates.
"We've got projects ready to go, but customers keep backing out when they see the monthly payments," one Florida builder told me last week, asking not to be named because, well, nobody likes being the face of bad news.
Housing has always occupied this weird space in the American economy. It's simultaneously a commodity and a dream – a financial investment wrapped in emotional decisions. Nobody buys a house purely as an investment vehicle (except maybe those Wall Street firms snapping up suburban neighborhoods, but that's a story for another day).
The current slump feels particularly cruel given the demographics. Millennials – that much-maligned generation now firmly in their 30s and 40s – should be driving a housing boom. They want homes. They need homes. But between student loan payments that rival car notes and housing prices that have disconnected from reality, many can't make the math work.
Here's the thing though: builder sentiment isn't just some abstract metric for economists to obsess over. It's a canary in the economic coal mine.
When builders get skittish, they build less. When they build less, our already inadequate housing supply gets tighter. When supply tightens while population grows... well, you don't need an economics degree to predict what happens to prices long-term.
The Fed's aggressive rate hikes – necessary as they might have been to tame inflation – effectively threw a bucket of ice water on the housing market. A 7% mortgage rate transforms that "stretch but doable" home purchase into "maybe I'll just rent forever."
Look, underneath all the quarterly numbers and percentage drops is a fundamental reality: America simply doesn't have enough housing. Full stop. We've underbuilt for over a decade. Zoning laws in high-demand areas are more protective than a helicopter parent. Our housing stock is aging faster than presidential candidates on the campaign trail.
And this raises the million-dollar question (or million-dollar starter home question, in today's market): is this a temporary cyclical downturn or something more structural?
If it's cyclical, we'll bounce back when rates eventually normalize and economic uncertainty fades. If it's structural – if we've fundamentally broken the mechanisms that once allowed middle-class families to buy middle-class homes – then we're facing social and economic ripple effects that go far beyond whether Home Depot beats its quarterly earnings estimates.
(I suspect it's both.)
Meanwhile, builders continue their cautious dance – breaking just enough ground to keep the lights on while waiting for a signal that consumers are ready to jump back into the market.
The American dream isn't dead. It's just gotten a lot more expensive. And the folks with the hammers and blueprints are increasingly worried that fewer and fewer Americans can afford the admission price.
