10 Insights into the Current Residential Construction Market
Date postedJune 24, 2025
Originally Published by: John Burns Research & Consulting — June 13, 2025
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Even with a looming slowdown, the firms that secure capital, scale operations, and lock in land today (institutionalization of land investing) will be best positioned to win when housing demand inevitably rebounds.
Our 2025 Housing Summit, held May 20–21 in Laguna Beach, brought together 165 housing industry executives for 2 days of strategic discussion, networking, and shared insights to inform future business planning.
10 key takeaways from the conference
- Spring sales slump likely stretching into summer: builders are trimming starts, renegotiating land deals, and leaning on rate-buydowns as entry-level traffic weakens and resale competition rises. FHA non-permanent resident restrictions went live May 25 (worries Fannie/Freddie implement too), and foreign investors are pulling back.
- Market share shift: big builders already control ~60% of the new home market and are accelerating M&A to press their cost-of-capital edge.
- Land banking surge: a rush of new capital is crowding the space, compressing returns. Builders are re-evaluating land deals, pushing timelines, and exercising lot-option walk-aways where deals no longer pencil.
- Tariff & sourcing risk: recent policy gyrations still add ~2% to material costs, pushing manufacturers to reshore and builders to bypass distributors for direct supply.
- Single-family rental (SFR) moat: scaled SFR operators report firm renewal rent growth, underscoring the barriers to entry due to the complexity of managing scattered homes and capital needs. SFR groups are partnering with builders to expand portfolios efficiently.
- Capital bifurcation: banks are tightening, while non-bank lenders and securitizations are stepping in and taking market share.
- Multifamily capital on hold: equity prefers buying 20% below replacement cost to funding new projects; scarce dollars will favor build-to-rent and land banking.
- Recession watch: Neil Dutta called for a recession in 2025, expecting 10-year Treasury rates at 3.75%–4%, implying mortgage rates near 6.5%.
- Structural undersupply: the US still needs ~1.3–1.6 million new homes a year through 2034, keeping long-term fundamentals intact.
- Demographic demand: the 33–37-year-old cohort—the largest age cohort today—is entering peak family-formation years, providing a durable demand floor once affordability normalizes.