NEW YORK, NY — Major U.S. homebuilders and real estate executives say the housing market has slipped into a softer stretch as mortgage rates remain above 7% and buyers keep running into affordability pressure. The latest comments from KB Home, Lennar and Coldwell Banker Realty point to a market where demand is still present, but harder to convert into sales.
Freddie Mac said the average rate on a 30-year fixed mortgage stood at 7.03% as of Sept. 24, 2026. That level continues to weigh on household budgets, and executives say the effect is showing up in buyer behavior, pricing decisions and the pace of new-home operations.
Executives describe a market that has clearly cooled
Coldwell Banker Realty CEO Kamini Rangappan Lane said the market is in a “soft period,” linking the slowdown to consumers’ reactions to higher borrowing costs and inflation. Her comments fit with what larger builders are seeing as they move through their latest earnings season.
KB Home Executive Chairman Jeffrey Mezger said conditions have weakened since the company’s June earnings report. Lennar Executive Chairman Stuart Miller used similar language, saying third-quarter results reflected an environment that has deteriorated since the last earnings call.
Those remarks do not suggest a collapse, but they do show a clear shift in tone. Builders are talking less about rapid growth and more about protecting margins, matching supply to demand and keeping inventory risk under control.
KB Home says higher costs are pressuring fourth-quarter deliveries
KB Home reported third-quarter revenue of $1.297 billion and earnings of $1.05 per share. Management said on its earnings call that fuel, general inflation and tariffs were adding cost pressure for fourth-quarter deliveries.
At the same time, the company said it had shortened construction time to 99 days from start to completion. That kind of speed matters in a slower market because it helps limit the time capital is tied up in unfinished homes and reduces the chance that costs move against a project before it is delivered.
KB Home also leaned on its built-to-order model, which accounted for 74% of third-quarter deliveries. The company said it was making price adjustments community by community, including in Southern California, to keep homes moving in a tougher affordability environment.
Lennar reports lower cycle times and improving construction costs
Lennar posted third-quarter revenue of $8.05 billion and earnings of $1.19 per share. The company said construction costs per square foot improved by 1% sequentially and 6% from a year earlier, while cycle time dropped to a record-low 116 days from 121 days in the prior quarter.
That faster pace is part of a broader effort to keep the business efficient as the market softens. Lennar previously said it had lowered construction costs to $81 per square foot while also bringing cycle time to a record low of 121 days. The newest figures suggest the company kept pressing for more efficiency even as the backdrop worsened.
For builders, shorter cycle times can help reduce exposure to shifts in rates, labor costs and buyer demand. They also make it easier to adjust output when the market no longer rewards aggressive expansion.
Incentives and pricing changes are helping buyers bridge the gap
Affordability remains one of the clearest pressure points in the housing market. With mortgage rates above 7%, many buyers need more help making a monthly payment work, and builders are responding with incentives and price adjustments.
Lennar said its average sales incentive rate was about 12% in the third quarter. The company also used base-price adjustments to support volume in a market where affordability remains a major constraint. Those moves can help close deals, but they also show how much leverage builders are giving up to keep homes moving.
KB Home took a more localized approach, adjusting prices community by community rather than relying on one broad tactic. In areas such as Southern California, that flexibility can matter because demand and affordability can vary sharply from one market to another.
What the current slowdown means for the housing industry
The latest earnings calls suggest the U.S. housing sector is trying to stay disciplined rather than chase growth at any cost. Builders are watching cost inflation, tariffs and borrowing conditions closely while trying to preserve demand through incentives, faster delivery schedules and more selective pricing.
That approach reflects a market where new-home buyers remain active enough to support large builders, but not strong enough to ignore higher financing costs. If mortgage rates stay near current levels, builders may continue to emphasize efficiency over expansion and use price adjustments to keep volume steady.
For now, the message from executives is consistent: the housing market is not frozen, but it is softer, more expensive for buyers and more difficult for builders to manage than it was earlier in the year.
More on what homes, rents and new builds are doing near you, on RHS Commoner.
