The housing market in 2025 never quite met expectations, in large part due to weak consumer confidence and persistent economic uncertainty. At the turn of the year, expectations for the market have adjusted, with many projecting a flat year for the housing market. These projections occurred before conflict in the Middle East added further uncertainty and added further mortgage interest rate and inflation concerns.
For builders, many of the practices that have been employed in the past year, including sales incentives and mortgage rate buydowns, have become commonplace. With buyers likely to remain hesitant, builders are expected to continue utilizing these tools through 2026.
In end-of-year earnings calls, many public builders communicated strategies centered on pace over price and expressed caution over ramping up starts in anticipation of the spring selling season. For many, the strength of the spring selling season will go a long way in determining levels of growth in 2026.
The public builder market has also experienced significant disruption at the beginning of 2026, with Tri Pointe Homes and United Homes Group being acquired by Japanese-backed entities.
What They’re Saying: On Outlooks for 2026
“We increased our sales incentives during the first quarter, and we expect incentives to remain elevated in fiscal 2026, with the level dependent on demand, changes in mortgage interest rates, and overall market conditions… Our experienced teams, industry-leading market share, broad geographic footprint, and focus on delivering quality homes at affordable price points are key components of our operating platform that support our ability to aggregate market share, generate substantial operating cash flows, and return capital to shareholders. We recognize the current volatility and uncertainty in the economy and will continue to adjust to market conditions in a disciplined manner to enhance the long-term value of our company.” — Paul Romanowski, president and CEO, D.R. Horton
“While in our first quarter, margins and our bottom line continue to reflect the affordability-driven realities of the current housing market, we also saw continuous improvement in all facets of our underlying cost structure that has set us on a course to stabilize and improve margins as we continue to produce volume and meet the market at affordability. Even with the current market challenges, we are feeling optimistic about our position in strategic markets and the progress made in reshaping our business for current conditions… We are adapting to market conditions as they are and not waiting for the market to bounce back.” — Stuart Miller, executive chairman and co-CEO, Lennar
“I look back on 2025 and say it was a good year. As you heard repeatedly, demand was highly variable as consumers responded initially to movements in interest rates and later to a slowing economy, which pressured jobs and, just as important, consumer confidence. All that being said, monthly absorption rates followed a typical seasonal pattern for the year and through the fourth quarter… Looking ahead to 2026, the industry enters a new year with improved affordability as mortgage rates are almost a full percentage point lower than a year ago, and whether through price reductions and incentives, new-home prices have reset lower while consumers benefited from another year of income growth as wages increased by upwards of 4%. A more financially capable consumer in combination with an improving affordability picture puts the industry in a much better position heading into the 2026 spring selling season. Given this dynamics, I think consumer confidence will be a critical component to determining just how strong buyer demand will be in the months to come.” — Ryan Marshall, president and CEO, PulteGroup
“We don’t yet know how the spring selling season will unfold, but we are encouraged by improved selling conditions in January when compared to the more difficult demand dynamics we experienced in December. We are also hopeful that lower mortgage rates will unwind some of the lock-in effect for existing homeowners who are looking to move up… As we look to 2026 and beyond, Meritage has chosen to be a top five builder focused on spec building with move-in ready inventory, streamlined operations, a diverse geographic footprint and a differentiated ability to compete against retail given our 60-day closing ready guarantee and realtor engagement. All of these attributes give us a clear competitive advantage to operate efficiently under all market environments.” — Phillippe Lord, executive vice president and CEO, Meritage Homes
“We remain optimistic about the housing market, as we believe favorable demographics will be a key driver supporting higher demand over time, together with the structural undersupply of homes… Consumers are demonstrating their interest in buying a home, reflected in our website visits, leads, and traffic to our communities. We produced 2,414 net orders in the fourth quarter, maintaining a consistent approach to pricing by offering transparent and affordable prices rather than inflated prices masked by heavy incentives. This remains the foundation of our competitive position, as it allows us to advertise our compelling pricing directly on our website. It is also how we build trust with our customers.” — Jeffrey Mezger, executive chairman, KB Home
“While affordability has improved over the last year alongside lower interest rates, wage growth, and price discovery. I believe consumer confidence in the broader economic and political outlook will be critical for further demand recovery. That said, I am cautiously encouraged by the sales success we achieved in 2025 and by the early momentum thus far in 2026… We expect to accelerate the number of new communities in 2026 from 2025, with well over 100 new outlets planned, including over 20 new Esplanade outlets, which are already supported by deep interest lists. The majority of these outlets will open for sales in the first half of the year and begin contributing to closings in the second half and into 2027.” — Sheryl Palmer, chairman and CEO, Taylor Morrison
“Given our land spend over the past several years, assuming improved market conditions, we have the ability to grow our deliveries by 10% annually in 2026 and 2027 based solely on our existing lot count as of 2025. That said, we will remain disciplined if slower market conditions persist and will not look to grow either our lot pipeline or deliveries for the sake of growth alone, as our more traditional land option strategy gives us significant flexibility in adjusting the timing and terms of land takedowns given the limited capital we have at risk.” — Dale Francescon, executive chairman, Century Communities
“Since mid-January, we have seen an increase in overall traffic and sales consistent with the start of the spring selling season. While it is early, we are cautiously encouraged by the increase in activity over the past month. Our strategy of balancing price and pace worked well in the quarter. Our overall incentive remained flat compared to the fourth quarter at 8% of sales price, the third consecutive quarter that incentives remained flat on a percentage basis. We are benefiting from a healthy mix of build-to-order and spec homes in our inventory, balancing the higher margin in our build-to-order business with the lower margin but faster turns in our spec business.” — Douglas Yearley, chairman and CEO, Toll Brothers
“In total, we own and control approximately 50,000 single-family lots, which is down 2,000 lots from a year ago, and this equates to roughly a five- to six-year supply. Most importantly, 49% of our lots are controlled pursuant to option contracts, which gives us continued flexibility to react to changes in demand or individual market conditions. Despite the current challenging conditions, we feel very good about our business, remain very confident in the long-term fundamentals of our industry, and are well positioned as we begin 2026.” — Robert Schottenstein, CEO and president, M/I Homes
“The ongoing complexity and difficulty of the housing sector persisted through 2025, yet our results demonstrate the strength and resiliency of our business, as well as the perseverance of our team in a challenging environment. I applaud the team for their effective execution amid choppy conditions and for their ongoing pursuit of new opportunities to drive value. As we look to 2026, we remain focused on further scaling our business and delivering long-term returns to our shareholders.” — Patrick Zalupski, CEO, Dream Finders Homes
“Our current approach emphasizes maintaining steady sales and clearing older lower-margin lots and older QMIs. Looking ahead, as we open new communities where these incentive costs are already factored in during land acquisition, we anticipate stronger gross margins provided the market doesn’t require further increases in incentives. Based on our recent sales, we don’t anticipate that to happen.” — Ara Hovnanian, chairman, president, and CEO, Hovnanian Enterprises
“We continue to write contracts in a market where many buyers need additional time to save for a down payment, to strengthen their credit, or to finalize the sale of an existing home. As a result, the time between contract and close remains extended, and we expect this trend to persist for the foreseeable future… Our long-term outlook for the housing market remains positive. The supply-demand imbalance, favorable demographic trends, and essential need for attainable homeownership reinforce the strength of our strategy. We move into 2026 with resilience, focus, and a deeper commitment navigating the market with the same determination that has guided us throughout our history.” — Eric Lipar, chairman and CEO, LGI Homes
“January sales pace has been in line with the prior year after eight quarters of year-over-year pace compression. We have tangible catalysts in place that will drive higher home building margins in the back half of the year and we’re managing our balance sheet and land spend to accelerate highly accretive share repurchases. On sales, we’re not just hoping market conditions continue to improve. We’re also benefiting from the new branding and lead generation efforts we launched in the fall. The focus of our Enjoy the Great Indoors message is a more comfortable and healthier home and dramatically lower utility bills.” — Allan Merrill, chairman and CEO, Beazer Homes
We are laser-focused on maintaining an investment-grade balance sheet to support our targeted expansion in high-volume markets. We remain focused on growing our business, particularly in our Trophy brand. Trophy’s growth in Dallas-Fort Worth and Austin, combined with our first open community in Houston during the spring selling season, we believe presents significant opportunities for sustained growth over the next few years.” — Jim Brickman, CEO, Green Brick Partners
“Our long-term goal is to continue to grow volume and gain market share via targeted investment though our footprint and opportunistically in new markets as we believe scale is a key driver of success in this business. We know that our path to higher volumes will not be linear, but instead will reflect the natural ebbs and flows of the housing cycle. As we’ve discussed before, we operate the business with a long-term mindset focused on maintaining pace and positioning the company for growth through the cycle rather than managing the business around short-term quarterly outcomes. Our focus remains on building affordable homes in markets experiencing strong population growth and job creation. Our value proposition includes the level of personalization that many builders do not offer at our price point, combined with a build time that few competitors can match.” — Greg Bennett, vice chairman and CEO, Smith Douglas Homes
