When belief meets business: Homebuilders cut deeper into profits

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Published Date 7/21/2025

“Build it and they will come”… is a line from a baseball movie about a guy who builds a baseball diamond on his farm in hopes that spectres of baseball greats will come to play in a kind of heaven on earth for all to see. It’s a story of belief, hope, and following instincts when those around you are naysayers.

CNBC’s Diana Olick reports that with the real estate market in flux and disarray due to unfathomable prices and high interest rates, the nation’s homebuilders are betting on people showing up, just like the movie suggests. How? They are cutting prices at the highest rate in three years, according to the monthly builder confidence survey from the National Association of Home Builders.

“Builder confidence in July rose 1 point to 33 on the NAHB index, a slight improvement,” says Olick. “Still, anything below 50 is considered negative sentiment. The index stood at 41 last July, and it has been in negative territory now for 15 straight months.”

She says the slight boost this month came from the recently passed budget act, which provided some tax relief for households, home builders and small businesses. This does not pair up with mortgage rates, however, which have been hovering in the same narrow, elevated level for several months.

She quotes NAHB chairman Buddy Hughes: “While this new law should provide economic momentum after a disappointing spring, the housing sector has weakened in 2025 due to poor affordability conditions, particularly from elevated interest rates.”

That’s evidently why 38% of builders said they cut prices in July, the highest share since the NAHB began tracking the metric in 2022. “Just 29% were cutting back in April. The average price reduction was 5% in July, where it has been every month since November,” says Olick.

Builders have been keeping the faith throughout the market turmoil by buying down mortgage rates to help get buyers in the door. This has cut into their margins, but not as much as price cuts, she points out. Real estate analyst Jonathan Woloshin adds, “Should the public builders supplement mortgage rate buydowns with more outright price reductions they would likely experience a larger negative gross margin.”

Olick reports that current sales conditions rose 1 point to 36 and sales expectations in the next six months increased 3 points to 43, while buyer traffic saw a 1 point drop to 20 — the lowest reading since the end of 2022.

NAHB’s chief economist, Robert Dietz, adds, “Single-family housing starts will post a decline in 2025 due to ongoing housing affordability challenges. Single-family permits are down 6% on a year-to-date basis and builder traffic in the HMI is at a more than two-year low.” Regionally, says Olick, builder sentiment was strongest in the Northeast where it rose 2 points, flat in the Midwest and dropped further in the South and West, where it was weakest.

With new home sales perennially remaining the straw that stirs the future of housing, however, let’s hope “Shoeless Joe” Jackson and his buddies appear to keep playing the game.

CNBC, TBWS

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