Real estate executives report that the U.S. housing market has entered a “soft period” as mortgage rates average above 7%, prompting homebuilders, including KB Home (NYSE:KBH) and Lennar Corp. (NYSE:LEN), to adjust operations to handle shifting cost pressures and elevated borrowing constraints.
Executives Signal Market Softness
Coldwell Banker Realty CEO Kamini Rangappan Lane noted that “we are definitely in a soft period right now,” citing consumer reactions to higher borrowing costs and inflation. Data from Freddie Mac shows the 30-year fixed-rate mortgage averaged 7.03% as of Sept. 24, 2026.
Major homebuilders echoed the softening backdrop in their third-quarter earnings reports. KB Home Executive Chairman Jeffrey Mezger stated that the company is operating in an environment with “conditions weakening since our June earnings report.”
Lennar Executive Chairman Stuart Miller similarly noted that third-quarter earnings “reflect the nature of the environment in which we are operating, which has deteriorated since our last earnings call.”
Builders Adapt via Costs and Faster Cycle Times
To protect margins and keep inventory risk low, builders are modifying construction schedules and managing cost structures:
- KB Home: Reported third-quarter revenue of $1.297 billion and earnings of $1.05 per share. Management noted during the earnings call that fuel, general inflation and tariffs were increasing cost pressure for fourth-quarter deliveries, but said it had reduced construction time to 99 days from start to completion.
- Lennar Corp.: Posted third-quarter revenue of $8.05 billion and earnings of $1.19 per share. The builder said construction costs per square foot improved another 1% sequentially and 6% year over year, while cycle time fell to a record-low 116 days from 121 days in the prior quarter. Lennar previously brought construction costs down to $81 per square foot while reducing its cycle time to a record low of 121 days, according to its earnings call.
Incentives and Pricing Adjustments
Builders continue relying on financing assistance and price adjustments to assist prospective buyers facing affordability constraints:
- Lennar’s average sales incentive rate was approximately 12% in the third quarter, alongside base-price adjustments aimed at sustaining volume in a market where affordability remained a key constraint.
- KB Home made price adjustments community-by-community, particularly in Southern California, while relying on its built-to-order model, which represented 74% of its third-quarter deliveries.
How Have These Stocks Performed?
| Stocks | 1-Month | 6-Months | YTD | 1-Year | 5-Years |
| LEN | -5.49% | -3.88% | -20.63% | -35.27% | -10.03% |
| KBH | -15.29% | -8% | -17.62% | -26.98% | 19.4% |
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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