What’s News in Earnings: Homebuilders Offer Clues on the U.S. Housing Market

SPEAKER_1 (0:01)

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Veronica Dagher (0:34)

Hey, listeners, it's Friday, February 20th. I'm Veronica Dagher for The Wall Street Journal. And this is What's News in Earnings, our look at some of the biggest themes standing out this earnings season. The US housing market is entering the 2026 spring selling season in an uneasy equilibrium. Mortgage rates have settled into a new normal, about 6 percent. But for many, the American dream feels further away than ever. The nation's biggest home builders are telling different stories about the housing market. This week, Toll Brothers reported a jump in profit fueled by luxury buyers. Meanwhile, the entry-level builder, DR. Horton, is shrinking home sizes and piling on incentives just to keep first-time buyers in the game. And PulteGroup is highlighting the country's growing geographic divide. Joining me to break down what all this means for the housing market is WSJ National Housing Reporter, Nicole Friedman.

Nicole, let's start with this geographic divide. PulteGroup is seeing a notable split. Demand in Florida was improving, but cooling for families in the West. How does what the company is saying reflect different housing trends across the country?

Nicole Friedman (1:52)

Yes, so we have definitely seen different housing markets in different parts of the country. There's been a lot more competition and rising home prices in the Northeast and Midwest, where the inventory is still lower than normal. But in the South and West, we've seen much slower housing markets even declining prices. And that's because there's been more supply of homes for sale in a lot of those markets. Also, as PulteGroup noted, in the West, there's been more concern about a slowdown in the tech sector, in white collar job hiring. And a lot of people are just unwilling to make a big purchase, like buying a home, if they're not confident about their job security. And then Florida is interesting because it's been one of the slowest markets in the country. We've seen a lot of inventory for sale in Florida, falling prices, and so now we're starting to hear from homebuilders and from local real estate agents that there's some pick up and demand in Florida. And so it's going to be important to watch this spring, whether we're starting to see a turnaround in that market, and if the lower prices there are starting to bring some buyers back.

Veronica Dagher (3:09)

So affordability is such an issue across the board, and builders are looking for ways to engineer through this affordability crisis. For example, DR. Horton is shrinking floor plans to keep a lid on prices. And here's PulteGroup CEO Ryan Marshall on the company's latest earnings call on talks they've had with the Trump administration.

SPEAKER_4 (3:30)

There's a lot being talked about, and as I know you can appreciate, it's hard, because housing remains very, very local. And so, you know, I think the entire industry, else included, are going to continue to work with, you know, the administration to try and create more supply, which ultimately will impact affordability.

Veronica Dagher (3:52)

Nicole, how are home builders trying to tackle affordability?

Nicole Friedman (3:55)

So this is the major challenge for home builders, is how to keep their homes affordable for buyers. And we're definitely seeing an investment in recent years in smaller homes, smaller floor plans that can kind of keep prices lower. Also, home builders have really leaned into incentives. They're often offering lower mortgage rates for home buyers. So if you look at a big home builders website, you can often see an advertisement for, you know, buy today at maybe a 5% mortgage rate, or even under five, which is lower than they could get if they bought an existing home. And so that's a big incentive. The latest survey from the National Association of Home Builders shows that two thirds of home builders were offering incentives of some kind in February, and about a third of builders cut prices in February. And this has become a big political topic that the administration is talking to home builders about. And so the builders are really eager right now to show that they are participating in this process and trying to collaborate with the administration.

Veronica Dagher (5:08)