As we move into 2026, I think the word that will define the year is transition. After a softer 2025 characterized by confusion, we’re starting to see some pieces shift.
If the Federal Reserve continues its rate cuts as expected, I believe we’ll see renewed buyer interest and the first half of 2026 could be brighter than most expect. Builders have been buying down rates significantly, and a lower interest rate environment could activate demand and spark momentum in the market.
Product strategy will become increasingly crucial for home builders in 2026. After location, home design is the most important factor for new-home shoppers. Consumers are not shopping for size, but instead are drawn to designs that complement open family spaces, efficient layouts, and interior touches that spark emotional connections.
Builders are being responsive to changing preferences, offering smaller homes and helping to solve affordability challenges. Following the period of the spec market in the post-pandemic era, the market is expected to transition back toward built-to-order, design-forward homes. A more even split between spec and choice will likely drive absorption for builders moving forward.
We’re also going to see a continued shift in suburban development driven by remote work, which is more prevalent than companies are publicly acknowledging. This is creating new opportunities for master-planned communities that offer emotional resonance, including walkability, lifestyle features, safety, and affordability.
One of the biggest question marks and potential for risk is AI. In the short term, AI can help boost productivity and supports market optimism. However, in the long term, we must monitor its impact on employment. If AI starts displacing workers in large numbers, the resulting job losses could affect homebuying power and economic growth. The impacts may not be fully realized in 2026, but I think we will see the fallout within two to three years.
Ultimately, the biggest opportunity in the new-home market—and what builders and developers have the most control over—is home design. Design remains the biggest motivator for consumers to buy new construction. Understanding this by price point, by product segment, and by market remains the biggest opportunity for profit, margin, and absorption.
