According to COGNITION Smart Data gathered in late 2024, 61% of builders believed the economy would improve in 2025 compared to the previous year. A new presidential administration and its promises of regulatory and financial reforms fueled this early optimism for a stronger, more profitable year.
But that optimism was short-lived.
By Q1 2025, builder confidence began to erode in the face of economic uncertainty and rising concerns over new tariffs. Mortgage rates have hovered around 7%, continuing the trend of reduced mortgage applications and declining home sales. In April alone, pending home sales dropped 6.4% across all major U.S. regions.
On a recent earnings call, Doug Bauer, CEO of Tri Pointe Homes, highlighted how broader uncertainty is impacting buyer behavior:
“While the longer-term outlook for housing remains favorable, with a continuing shortage of homes and strong demographics, it’s clear that elevated uncertainty about the economy is weighing on consumer sentiment. International trade tensions and the new tariffs have emerged as unpredictable variables in the current environment. The headline news of tariffs and their potential inflationary effects has dampened buyer confidence.”
Despite these macroeconomic headwinds, Bauer added that the company doesn’t expect tariffs to have a material impact on its cost structure in the short term.
Meanwhile, the imbalance between supply and demand continues to reshape market dynamics. Redfin reports that there are nearly 500,000 more home sellers than buyers–an imbalance not seen since 2013. This signals a shift toward a buyer’s market, with falling home prices likely as the year progresses.
Builders are taking proactive steps to adjust to the evolving market.
Ara Hovnanian, chairman and CEO of Hovnanian Enterprises, recently shared how his company is navigating the environment:
“Even though the spring selling season has not played out the way everyone had hoped, our focus on pace over price resulted in an above-average number of contracts per community compared to our peers… We’re intentionally operating at an elevated level of quick move-in homes (QMIs) so that we can offer affordable mortgage rate buydowns in the near term to give more certainty in an uncertain market.”
Rate buydowns have become a popular tool for builders to offset high mortgage rates and maintain steady sales activity. By offering buyers more predictable monthly payments, builders are hoping to sustain buyer interest even as borrowing costs remain elevated.
At the same time, sustainability remains a key priority for both builders and buyers. COGNITION data continues to show strong demand for energy- and health-focused features, especially those that help reduce the lifetime cost of homeownership. Among the most in-demand features:
The long-term outlook for the housing market remains favorable, but builders must stay flexible and resilient. In the short term, strategies such as pricing adjustments, mortgage rate buydowns, and offering high-performance features are key as builders focus on meeting buyer needs while managing risk.
Although there was strong optimism in late 2024, builders are now taking a more measured approach, staying cautiously optimistic while making strategic adjustments to stay aligned with shifting market conditions.
Be sure to mark your calendars for the November–December 2025 issue of Green Builder, where we’ll share an in-depth look at the industry’s year-end performance, featuring exclusive insights from COGNITION Smart Data.
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About COGNITION Smart Data
COGNITION is the only market insights platform specifically engineered for the building industry’s sustainability transformation. We track evolving consumer behaviors, emerging technologies, policy shifts, competitive benchmarks, and market demand signals so you can adjust faster, sell smarter, and grow revenue—confidently.