Housing Market and Homebuilder Sentiment (with Carol Massar, Tim Stenovec)

Homebuilders are more bullish than headline new home sales suggest, aggressively buying finished lots. The market is K-shaped: higher-end homes ($950k+) sell well with cash buyers, while entry-level buyers struggle with affordability. The canceled bipartisan housing bill's impact is limited—supply issues are local (zoning, permitting), not federal. Builders are adapting with smaller homes and rate buy-downs to maintain volume.

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Housing Market and Homebuilder Sentiment (with Carol Massar, Tim Stenovec)

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Homebuilders are bullish, buying finished lots aggressively, and adapting to demand. This supports a cautiously positive outlook for small-cap and regional homebuilder stocks within the Russell 2000.

Tim Stenovec

Asks what homebuilders are telling Katy about the market, given her role in land supply.
Katy Hubbard

New home sales were lower than expected (580k, down 7%), but builders are more bullish than headlines suggest. They are aggressively buying finished lots (land ready to build), indicating confidence. They are being more disciplined—starting fewer spec homes and moving toward build-to-order.
Tim Stenovec

Asks if the higher-end homebuilders are more active, given the build-to-order trend.
Katy Hubbard

Yes, the market is K-shaped. Higher-end homes ($950k+) are doing extremely well with cash buyers. Entry-level buyers are plagued by affordability, especially in coastal cities with high land prices and regulation. Builders like Lennar and D.R. Horton are adjusting by building smaller homes and offering financing incentives in more affordable markets.
Carol Massar

Asks for her view on President Trump canceling the bipartisan housing bill and its impact.
Katy Hubbard

It's good both sides are addressing supply, but federal action has limited impact. Supply is a local issue—permitting, zoning, and deregulation. Institutional investors own less than 1% of homes (3% at peak in 2022). Many build-to-rent developers are on the sidelines waiting for clarity. The bill could help with environmental deregulation and smaller bank lending, but local zoning reform is key.
Tim Stenovec

Asks if ADUs (accessory dwelling units) are making a dent in supply.
Katy Hubbard

Some developers who couldn't make deals pencil before are now coming back to the table if they can improve density through ADUs. It could help.
Carol Massar

Asks what is top of mind for homebuilder clients—rates, policy, labor, or materials?
Katy Hubbard

At the local level, incentives for municipalities to approve/deny zoning in 90-120 days would help reduce carrying costs. Builders are also adjusting home types (smaller) and buying down mortgage rates to deliver affordable payments. Lennar is still delivering 20,000 homes a quarter by eating into margins to maintain volume.

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