Builders Didn’t “Mess Up” — The Math Forced Their Hand
The narrative you keep hearing is that we still have a housing shortage.
That prices are supported by demographics, low supply, and government backstops. But when you actually look at the data — the real math — that story starts to fall apart fast.
Let’s walk through what’s actually happening, why builders are in trouble, why buyers are frozen, and how this cycle likely ends.
The Housing Shortage Narrative Is Breaking
We’re told there aren’t enough homes.
Yet at the same time, housing units authorized but not started are sitting at record highs. These are fully permitted, approved lots — ready to go — and builders are choosing not to build.
That alone should raise questions.
You don’t get a true shortage when inventory is permitted but construction is paused. You get a mismatch. And that mismatch is the core problem in today’s market.
Builders Didn’t “Mess Up” — The Math Forced Their Hand
Builders didn’t suddenly forget how to build starter homes.
They were pushed out of that business.
In Florida, regulatory and soft costs alone can add $30,000–$80,000 per home before land is even considered:
Impact fees
Permits and reviews
Hurricane code requirements
Flood elevation and delays
On a $200–$250k starter home, $40k in regulation can represent 16–20% of the entire price.
Those costs don’t scale down.
So builders did what any rational business would do: they moved up-market.
When margins are 18–22% either way, it makes far more sense to build a $600k–$700k home than a $250k one — even if the demand isn’t there long-term.
That decision is now coming back to bite the market.
New Home Inventory Is Back at 2009 Levels
Here’s where the pressure shows up.
New home inventory — completed, under construction, and not started — is now back near post-GFC levels.
Why?
Because the next generation cannot afford what’s been built — especially at today’s mortgage rates.
So builders are doing the only thing they can do:
They’re cutting.
Net new-home prices (after incentives) are already down ~27% from the peak — flirting with crash territory. And in many markets, new construction is now cheaper than existing homes, a historic flip that almost never happens.
When that inversion shows up, it’s a warning sign.
Payments, Not Prices, Broke the Market
We don’t live in a price economy anymore.
We live in a payment economy.
The average monthly mortgage payment jumped from roughly $1,600 to ~$3,000 in just a few years.
That’s a 60%+ increase.
You cannot do that without consequences.
When payments spike that fast:
Buyers disappear
Pending sales collapse (lowest December pending sales… ever btw).
Sellers are forced to chase the market down
This is why housing is frozen.
Why buy a home for a $2,700–$3,000 payment when you can rent the same house for $2,000 — and rents are now falling?
The answer to this question above will tell you everything you need to know.
First-Time Buyers Are Being Wiped Out
The long-term damage here is severe.
First-time buyers used to represent 40–50% of the market. Today, that share has collapsed toward ~20%.
Even more alarming:
Only ~12% of 30-year-olds today are both married and homeowners (down from ~50% in the 1950s)
The median age of a homebuyer is now 59
That tells you everything you need to know.
The next generation is locked out — not because they don’t want homes, but because the math doesn’t work.
And when you ask, “Who is the next buyer?” the answer gets uncomfortable.
Credit Stress Is Already Showing Up
This isn’t just housing.
We’re seeing rising:
Student loan delinquencies
Auto loan delinquencies
Credit card defaults
All of this feeds back into housing through tighter credit, weaker demand, and forced selling at the margins.
In Florida and Texas, we’re already seeing foreclosures cluster around new-construction heavy areas, especially FHA buyers who bought late in the cycle with minimal equity.
You don’t need everyone to crack — just the marginal seller.
How This Cycle Ends
Prices don’t crash everywhere overnight.
They grind lower:
Through incentives
Through stagnation
Through selective capitulation
My personal investment model points to a 31–42% peak-to-trough decline from the October 2022 highs in many overheated markets — including my local market.
That isn’t bearish.
That’s simply mean reversion.
And how you play the game in a mean reversion market is different than how you play it in one of the fastest moving markets ever in history. That’s why this is important. Knowing this data, presenting it to your customers, and being able to guide them, is extremely important to your success as a real estate agent. That’s what our company is all about and why I put this data out there.
Frankly — the data tells the story — and helps buyers and sellers make the best decisions.
Love hearing from y’all - jon@movewithmomentum.com
(If you want deeper data, charts, and the things I can’t say on YouTube, you know where to find me.)
