Challenging. Uneven. Uncertain. The same words come up repeatedly when builders describe the housing market they experienced in 2025. Affordability constraints, a cloudy economic backdrop, and elevated consumer confidence issues have persisted all year, muting the spring selling season and tempering activity for the duration of 2025.
Many of the challenges, including buyer hesitancy, weak consumer confidence, and economic uncertainty, have been highlighted by public builders during quarterly earnings calls. For private builders, their challenges have been the same throughout 2025 and have contributed to a difficult operating environment. Don Luke, Texas regional president at Empire Homes, says model traffic has been below 2024 levels due to buyer indecision and unpredictable consumer behavior meant the company did “not feel that there was a spring selling season in 2025.” For Saun Sullivan, CEO of DSLD Homes, 2025 had potential but “was a bit disappointing” for the No. 24 company on the 2025 Builder 100.
Kaylee Rich, director of sales support for No. 42 Betenbough Homes, noted buyer demand was “steady but uneven” throughout 2025 with an uptick in traffic beginning in the fourth quarter. Several companies, including Rich’s Betenbough Homes, Louisiana-based DSLD Homes, Kentucky-based Fischer Homes, and Alabama-based Davidson Homes, noted that while overall traffic has been down, conversion levels have remained healthy.
“Our number one priority has been maximizing the experience of the people who do come through the door,” Brandon Jones, CEO of No 46 Davidson Homes, tells Builder. “There is only so much we can do to control macroeconomic factors and there is only so much we can do to control consumer confidence.”
Tim McMahon, CEO of No. 31 Fischer Homes, says the company’s traffic-to-sale conversion is approximately 50% above historical trends over the past two years.
“Prospective homebuyers who tour our model homes continue to demonstrate genuine interest in homeownership, even as overall market demand has softened,” McMahon says.
The New Status Quo: Incentives
Throughout the year, incentives have become increasingly prevalent as a way for builders to combat buyer concerns around prices and interest rates. Zonda’s October New Home Market Update found 60% of communities offered incentives on to-be-built homes and 79% of communities offered incentives on quick move-in supply.
While incentives are not a silver bullet for buyer hesitancy, private builders have matched their public peers by increasing the utilization of sales incentives to compete in the current market. Sullivan of DSLD Homes, forecasts mortgage buydowns will remain commonplace for the foreseeable future given their popularity with buyers. Drees Homes chief financial officer Andy Seitz says incentives remain an element of the company’s overall value proposition to customers.
“We often offer flex cash, allowing customers the freedom to decide how they would like to utilize these funds,” Seitz says. “Looking ahead to 2026, we will continue to provide incentives in various forms to meet the market and offer buyers greater flexibility.”
Across product types, Luke says entry-level communities require higher incentives to remain competitive “against aggressive discounting” while higher-end product lines are able to use incentives more sparingly. Betenbough Homes, which primarily operates in the entry-level market segment, has found its financing incentives enabled hesitant buyers to bridge the gap between what they could afford and monthly payments that wouldn’t break the bank.
“As we look toward 2026, we expect incentives to remain a meaningful part of the strategy,” Rich of Betenbough Homes says. “Our goal is always to right-size incentives to match the market, protect margins, and ensure our homes remain accessible to first-time buyers.”
Competition From Resale Market
The impact of elevated interest rates stretches beyond the new construction market. The high number of homeowners with mortgage rates well below the current average has contributed to a lock-in effect that has charactered the resale inventory for the past several years. However, recent data indicates that resale inventory is beginning to increase. Despite the increase, many private builders are not yet seeing elevated competition from resale supply in their markets.
“Resale inventory has increased, but our primary competition continues to be new construction,” says McMahon. “Today’s buyers remain strongly drawn to the value and long-term advantages of a newly built home, particularly the opportunity to personalize their space to fit their lifestyle.”
“Days on market for resale homes have risen, reflecting broader consumer sentiment rather than local fundamentals,” he continues. “As confidence improves, we expect activity to strengthen.”
For Empire Homes and Betenbough Homes, the trends are similar. While resale inventory has risen modestly, this has not materially impacted demand. Private builders remain confident, noting buyers may prefer new construction due to financing incentive options, warranty coverage, or energy efficiency benefits.
“We do not expect resale inventory to meaningfully affect demand in 2026,” Luke says. “If rates stabilize or decline, resale homes may become more active, but new construction will remain highly attractive due to design, warranties, energy efficiency, and move-in-ready convenience.”
Expectations for 2026
The headwinds present in the housing market will likely continue to provide challenges in 2026. Rich, Seitz, and Luke say starts activity in the coming year will be targeted, disciplined, and measured due to market conditions.
“We expect 2026 to improve modestly—not a full rebound, but a healthier environment than 2025, driven by expected rate normalized and improved buyer confidence,” says Luke.
While cycle times and supply chains have normalized, the land market remains challenging and difficult, requiring builders to exercise more scrutiny and caution on potential deals.
“Even maintaining volume from 2025 to 2026 is going to be an achievement unless we get some tailwinds. If the headwinds continue, you’ve got to be better to get the same [results],” says Jones. “We have to operate with the information that we currently have, and function based on current conditions. If things get better, great. If they don’t get better and the headwinds either stiffen up or don’t relent, we’ll be prepared for that, too.”
