As we slip into the second half of 2026, major homebuilders are looking past this challenging year and making their predictions for the future in a so-far very unpredictable market.
Three major homebuilders—D.R. Horton, Lennar Corp and PulteGroup—ended their earnings calls over the last few weeks with optimistic yet guarded sentiments, as the real estate industry more broadly seeks to parse out an overall slow summer and continued geopolitical uncertainty.
Overall, the current economic climate has stunted major growth for homebuilders.
D.R. Horton Executive Vice President and Chief Financial Officer Bill Wheat said their Q3 returns have been lower than what they expected in the long run, during the company’s third quarter earnings call on July 21. “We have our margins, while in the longer-term historic range, we believe our longer-term stabilized margin should be a bit higher than this.”
Jessica Hansen—D.R. Horton’s senior vice president of Communications—reiterated their expectations for 2026’s final quarter to end on a low-yet-anticipated note at the meeting.
“We do expect our Q4 starts to be lower than Q3 and we’ll continue to adjust our starts accordingly based on the demand that we’re seeing,” she said. “Of our total completed specs, only 600 have been completed and unsold for greater than six months, and that’s actually down from 800 sequentially.”
D.R. Horton uses a non-standard fiscal calendar, starting its fiscal year on Oct. 1, positioning its July earnings as its Q3 report. Lennar Corp and PulteGroup align their fiscal year and financial reporting with the standard calendar year beginning Jan. 1, which positions their most recent earning report as Q2 results.
Interest rates and consumer confidence
One major factor in the equation for homebuilders is, unsurprisingly, heightened interest rates and how they impact homebuying behaviors.
“First, mortgage interest rates have remained stubbornly elevated in the mid-to-upper 6% range throughout our second quarter,” Stuart Miller—Lennar Corp’s president and CEO—stated in the company’s Q2 earnings call on June 12.
“The 30-year fixed rate sits between 6.4% and 6.5% today, modestly better than a year ago where rates were closer to 7%, but still at a level that keeps affordability challenged.”
During the earnings call, Miller stated that at a 6.5% federal mortgage rate, buyers with a median family income are spending more than 30% of their gross income on housing. Currently, the average 30-year fixed mortgage rate sits around 6.77% and maintains its elevated status. Last week’s mortgage applications report demonstrated the repercussions of inflated rates, with a 2.9% decrease in activity.
Ali Wolf—chief economist at Zonda and new construction listing portal NewHomeSource—tells RISMedia that mortgage rates in the high 6% range may become the new norm.
“Zonda believes mortgage rates will remain higher for longer. Our current outlook calls for rates to stay between 5.8% and 6.8% through the end of 2027,” she says. “While there are plenty of uncertainties over the next 18 months that could push rates higher or lower, we do not foresee a return to 3% or 4% mortgage rates anytime soon.”
After the Bureau of Labor Statistics’ (BLS) reported a loss of 23,000 payrolls in July, consumers may continue to bear the weight of tariffs and the war. Miller attributes AI and rapidly changing technology to the inconsistency in buyer behavior.
“Consumer psychology is being affected by anxieties about the long-term security of jobs at a time of rapid technology change,” he said. “The advance of artificial intelligence is raising questions about the future of employment across a wide range of the workforce.”
Miller mentioned May’s CPI report and other factors that are influencing buyers.
“The inflation picture has also become more complicated,” he said. “For the month of May, the BLS reported that the all-items index rose 4.2% on a year-over-year basis. The primary driver (for the 4.2% increase) was energy, as gasoline prices increased 7% in May, and are up over 40% year-over-year, driven by disruptions to oil supply tied to the Iran conflict.”
Miller isn’t the only one concerned about oil prices. PulteGroup President and CEO Ryan Marshall commented on foreign factors attributing to affordability issues in their Q2 earnings call on July 22.
“The environment that we’re in right now, there’s a lot of focus on affordability in every consumer product or everything that society consumes, especially housing,” he said. “Oil probably continues to be the one that I’m most nervous about just because of how much oil is in some pretty big-ticket items, like land development.”
He noted that consumer confidence has been shaken by elevated electric bills, stating that “their willingness to make major financial commitments, including purchasing a home, moderates, even when their underlying desire to own has not changed.”
D.R. Horton President and CEO Paul Romanowski answered a Q&A during the company’s third quarter earnings call. After being questioned about the stabilizing nature of the economy and political factors, Romanowski said that—when looking at D.R. Horton’s sales—their sales are in-line with normal seasonality. “It’s just needing to see be a little more confident in the overall economy and in their ability to move forward with a purchase today.”
I’m just a bill
When asked about recent legislation and the 21st Century ROAD to Housing Act, homebuilders seem to have mixed feelings on the subject.
“Several states have passed or are advancing restrictions on large-scale investor acquisitions, and federal attention is growing to this issue as well,” Miller said. “We view this initiative as a concerning long-term development for housing as it is recalibrating demand dynamics in a number of local markets, and might have the effect of reducing production of housing and reducing much-needed supply.”
The ROAD to Housing Act passed into law earlier this summer, but it may still be too early to see any changes to the housing market. Romanowski stated in the earnings call that he has not seen a significant shift as of yet, and that “it’s fairly new in terms of that legislation being activated.”
Some have a more positive outlook on the law and what it means for the future.
“I think most of the stuff in the ROAD to Housing Bill is directed at manufactured housing, which I think can be favorable for overall housing supply,” Marshall stated in PulteGroup’s Q2 earnings call.
With the passage of the ROAD to Housing Act, homebuilders may eventually change their tune after last month’s lackluster builder sentiment report. The report highlighted a downward trend for the Housing Market Index (HMI), which was only 34 in July (on a scale from 0 to 100).
Based on a recent survey by Zonda, Wolf says that the majority of builders are skeptical that the law will make a meaningful difference. “When asked in a survey about the bill’s potential impact on their ability to increase production over the coming years, 59% of builders said it would have no impact. Another 31% were unsure, while just 11% believed the legislation would somewhat improve their business,” Wolf states.
Cutting costs (and wood)
Homebuilders, however, are seeing some savings across the board. Each of the major builders economized in different areas, ranging from construction costs to corporate adaptation.
“The majority of the savings we’re seeing is still on framing, which would be inclusive of labor,” Hansen said in D.R. Horton’s Q3 earnings call. “Framing was our biggest cost category of savings. Very positively, though, across all of our major cost categories, we saw a decline in terms of our costs on closings in the third quarter. We expect that to hold at least into Q4.”
Lennar Corp is seeing similar savings to their “foundational technologies” according to Miller. “As we really get our new systems entrenched, it’s going to enable us to bring costs down,” he said. “I don’t know that we can quantify either the amount or the timing, but we know that the cost reductions are going to be quite substantial as we go forward, particularly in some of our corporate and SG&A costs.”
PulteGroup Executive Vice President and Chief Financial Officer Jim Ossowski noted the breathing room lower lumber costs provided in the beginning of the year. “Going forward, we’ll lose the tailwind of lower lumber costs as we move through the year, but we still expect year-over-year house costs to be down slightly from 2025.”
Comments by experts on July’s new residential construction report from the U.S. Census Bureau pointed out that strained construction budgets have weakened builder confidence, leaving homebuilders to brace for marginal gains amidst an uncertain climate.
“After over three years of navigating a rather difficult and complicated housing market, we believe that we are well-positioned for market conditions as they unfold,” Miller concluded in the earnings call. “In the current market, incentives are declining, margins are starting to improve and our sales and marketing machine is generating stronger leads, faster engagement and better conversion.”
