Episode summary
Homebuilder Sentiment Inches Up in December, Highest Since April
Bloomberg Surveillance
· · Guests: Stephen Kim, Robert Dietz, Drew Reading
Summary
An analyst argued that US housing is still constrained by weak turnover and that lower mortgage rates have not produced the pickup in demand builders had hoped for. He said existing home prices could retreat 1% to 2% in 2026 as more homeowners finally decide to sell, leaning on substantial accumulated equity rather than waiting for a perfect rate environment.
The discussion used Lennar as a read-through for the broader homebuilding group. The analyst said the company’s latest numbers reinforced that it remains tough out there, and that the market has not responded to lower rates nearly as much as builders expected. He also said he had recently reduced his stance on the sector, describing the group as difficult to own because of uncertainty around demand and government action.
A major theme was how builders have been using mortgage-rate buydowns and other incentives to support sales. The analyst explained that these tactics can be cheaper than cutting sticker prices, but warned they may face a regulatory vulnerability if a loophole around seller concessions is changed. He said the real unlock for housing is less about finding a single magic mortgage rate and more about life events that eventually push owners to move.
Key takeaways
- An analyst expects existing home prices could fall 1% to 2% in 2026, mainly because more owners may finally list homes.
- The analyst said Lennar’s results showed mortgage rates near 6.3% have not revived demand the way builders hoped.
- Builders have leaned heavily on mortgage-rate buydowns, with the analyst noting those incentives can be cheaper than outright price cuts.
- The analyst warned the builders’ use of a forward-purchase loophole for concessions could be vulnerable to regulatory changes.
- He said roughly 4 million people may have delayed moves in recent years, creating pent-up demand tied to life events rather than a single rate threshold.
Notable quotes
“I think you could see prices down one or 2% this year, next year”
“it is tough out there. And what they told you was that even though mortgage rates have, you know, trended down, it has not stimulated an improvement in homebuying demand”
“We said this group cannot be owned”
“what's been going on for most of the last two years to keep the business going”
“there's not like a magic rate, but certainly rates going lower makes it a little bit easier to leave a little less money on the table”
How the episode opens
My view is that actually you could see existing home prices go retreat a bit, you know, 1 to 2%. I don't think it will be palpable because you don't. I think that would be very problematic.
But I think you could see prices down one or 2% this year, next year. On the exist in the existing market. And I think actually that would be, you know, positively received.
And I think that really what would drive that is homeowners who have been wanting to sell finally saying, you know what? We're going to make the move. And I'm willing to take a little bit of a lower price because I still have significant amounts of home equity.
I think that's something to really watch for in 2026. Tom, you know, Steve's a player. He doesn't have to schlep into the Evercore ISI offices in New York City.
He thinks his shingle in Raleigh, North Carolina, one of the most beautiful parts of the country down there, and he's right next to my my dukes. He can go there anytime he wants to see some good basketball. Stephen, we have Lamar reported today disappointing numbers last night.
Some disappointing numbers here. Talk to us about Lennar and what these homebuilding companies are telling you guys these days. Well, the first thing to say upfront is that Lennar has a lot of idiosyncratic aspects to it right now.
It's a very, very fascinating. But there's no question there is a read across. They are the second largest homebuilder in the country, and it is tough out there.
And what they told you was that even though mortgage rates have, you know, trended down, it has not stimulated an improvement in homebuying demand that was anywhere near what they were hoping for.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- homebuilder sentiment
- mortgage rates
- housing supply incentives
- federal reserve rate cuts
- housing affordability
Companies and tickers mentioned
- EVR
- WFC
- Evercore ISI
- Wells Fargo
Watch the episode
Watch “Homebuilder Sentiment Inches Up in December, Highest Since April” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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