America’s Economy Is Growing. Its Housing Market Is Being Left Behind.

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The U.S. economy grew 3.4% in the third quarter. Residential investment fell 3.3%. That divide exposes a housing market in which strong national growth is delivering precious little relief to prospective homebuyers.

At 8:30 Thursday morning, the federal government reported that the American economy had expanded at a 3.4% annualized rate during the third quarter. It was a strong number, up from 2.2% in the previous quarter, and one that will undoubtedly be welcomed by policymakers and investors.

There was another number in the report that deserves at least as much attention.

Residential fixed investment contracted 3.3%.

Consider that combination. The economy is producing more, businesses are investing, and overall consumer spending remains resilient. Yet one of the industries most closely tied to household wealth, financial mobility and the American middle class is moving in the opposite direction.

The disconnect should trouble anyone who believes homeownership remains an essential part of this country’s economic foundation.

I am pleased to see the American economy growing. Strong businesses, expanding employment opportunities and productive investment benefit the country. But celebrating growth without confronting the deteriorating economics of buying a home risks overlooking one of the most consequential problems facing American families.

A strong national economy means considerably less to a household that can no longer afford to participate in the housing market.

The economic headlines conceal a difficult reality

The Bureau of Economic Analysis reported Thursday that third-quarter growth benefited from stronger investment, consumer spending and government spending. Its measure of real final sales to private domestic purchasers, which excludes inventory changes and government spending, increased at a 4.9% annualized rate. That supports the conclusion that underlying private-sector demand remained strong.

But the government’s separate September income and inflation report, released the same morning, presented a less encouraging picture of household purchasing power.

The personal consumption expenditures price index increased 3.6% over the preceding 12 months. Core inflation, which excludes food and energy, was 3.1%. Inflation-adjusted disposable personal income fell 0.3% in September, while the personal saving rate declined to 3.8%.

The quarterly GDP growth rate and annual inflation figures measure different periods and should not be confused. Nevertheless, they illustrate a distinction between aggregate economic performance and the circumstances confronting individual households.

In September, real consumer spending was essentially unchanged despite a 0.5% increase in nominal expenditures. Americans spent more without obtaining a corresponding increase in the volume of goods and services purchased.

A lender cannot approve a mortgage because GDP exceeded expectations. A loan officer must document income, assess debt, establish available assets and determine whether a borrower can reasonably meet the required payment.

Those calculations have become substantially harder.

Mortgage rates have changed the math of homeownership

Consider the difference a single year has made. Freddie Mac’s October 22 Primary Mortgage Market Survey placed the average 30-year fixed mortgage rate at 7.32%, compared with 6.19% a year earlier. Those are survey averages, not rates available to every borrower.

At September’s national median existing-home sales price of $417,500, a buyer making a 20% down payment would borrow approximately $334,000. The monthly principal-and-interest payment on that amount would be about $2,294 at 7.32%, versus $2,043 at 6.19%.

That is roughly $251 more each month, or approximately $3,010 annually, on the same loan balance. The illustration excludes property taxes, insurance, maintenance and any other ownership costs, and holds the price constant to isolate the impact of interest rates.

For some buyers, that increase is enough to change mortgage eligibility, force a smaller purchase or end a search entirely. For households already struggling to accumulate a down payment, the problem is compounded by prices that remain elevated.

According to the National Association of Realtors, the national median existing-home price was $417,500 in September, up 1.3% from a year earlier.

It is troubling that a household can earn more money, save responsibly and improve its credit profile, only to discover that purchasing power has deteriorated. That is hardly a sustainable foundation for expanding homeownership.

Homebuyers are already sending their own warning

September pending home sales fell 7.3% from August and 11.3% from a year earlier, according to NAR’s October 20 report. Contract activity declined in every major region.

Existing-home closings did increase 1.5% in September from the previous month, reaching a seasonally adjusted annualized pace of 3.99 million. But transactions remained 2.2% below their year-earlier level, and the deterioration in pending contracts suggests the market has not regained stable footing.

These figures should not be viewed solely through the lens of real estate company revenues. Every completed sale supports a network of professionals and businesses: mortgage originators, title and escrow companies, appraisers, inspectors, contractors and local service providers.

More importantly, every postponed purchase or sale represents a household whose plans may have been interrupted. A young couple delays buying its first property. A family stays in a home that has become too small. An older homeowner declines to downsize because the replacement property would require much more expensive financing.

Those decisions shape communities and the future supply of available homes.

Homebuilders are telling Washington something it needs to hear

Thursday’s earnings report from D.R. Horton reinforced the message coming from buyers. The nation’s largest homebuilder by volume reported that net sales orders declined 7% in its fiscal fourth quarter to 18,619 homes. Its cancellation rate increased to 23% from 20% a year earlier.

The company remained profitable, earning approximately $2.9 billion in fiscal 2026 and closing 84,202 homes. Yet its initial fiscal 2027 outlook calls for consolidated revenue between $30 billion and $32 billion, below the approximately $33 billion recorded in 2026.

Meritage Homes delivered a similar warning in its October 28 earnings release. Third-quarter orders declined 15% year over year. The company reduced land acquisition and development spending by nearly 40%, to $329 million, as management focused on preserving capital and margins.

The National Association of Home Builders reported that builder confidence fell to 29 in October, its lowest level since June 2012. Forty-three percent of builders cut prices, while 65% reported using sales incentives.

A builder cannot continue acquiring land, financing infrastructure and constructing homes without reasonable confidence that qualified buyers will be available when the properties are completed. But reduced land investment and construction today can create additional supply constraints several years from now.

That is the danger of allowing a prolonged affordability problem to weaken the industry’s future production capacity. When demand eventually improves, the country risks having too few homes ready for the families who need them.

WRE News reported separately on D.R. Horton’s order decline and cautious outlook. The wider challenge is whether policymakers recognize the long lead times involved in building homes and act before today’s pullback becomes tomorrow’s shortage.

An uncomfortable conversation about corporate priorities

D.R. Horton repurchased $3.6 billion of its common stock during fiscal 2026. It also paid $513.3 million in dividends and projected approximately $3 billion of additional share repurchases during fiscal 2027.

Its executives have every right to manage capital responsibly. Share repurchases are legitimate, and no homebuilder should be expected to construct houses it cannot sell profitably. D.R. Horton also continued investing in land and development throughout the year and maintained substantial liquidity.

Nevertheless, the figures raise a question the industry should be willing to discuss: Is the financial and regulatory environment consistently rewarding the housing production America needs?

The answer cannot be reduced to blaming corporate executives. Successful builders are essential to a functioning housing market, and public companies have obligations to their investors. But neither should the industry insist that affordability is a national emergency while avoiding scrutiny of how development is financed, capital is allocated and entry-level homes can be produced at sustainable margins.

Those are legitimate questions. Ignoring them will not make housing more affordable.

The mortgage-rate lock-in problem is trapping the resale market

Homebuilders face weaker orders. Existing homeowners face a different financial calculation. Millions bought or refinanced when mortgage rates were substantially below current levels. For many, moving would mean replacing a favorable loan with a much more expensive one.

A First American Data & Analytics report released October 28 estimated that Americans held a record $13.2 trillion in accessible home equity during the second quarter. Of that amount, approximately $11.6 trillion, or 88%, was associated with homeowners whose primary mortgage rates were below the prevailing market rate.

First American defines accessible equity as the amount potentially available while keeping total loan-to-value ratios at or below 80%. The estimate is not cash in homeowners’ accounts, nor does it demonstrate what individual households will choose to do. It does, however, quantify a powerful incentive not to give up an existing low-rate mortgage.

A homeowner carrying a 3% loan may have little interest in selling and taking out a substantially more expensive mortgage. That decision can be entirely rational for the household while creating problems for the broader market.

Families needing more space delay moving. Retirees hesitate to downsize. Existing inventory turns over more slowly, limiting options for first-time purchasers.

We should be concerned when the ability to move through the housing market depends so heavily on the year a household originally secured financing. The country is becoming divided between homeowners who benefited from an earlier period of low borrowing costs and buyers struggling to enter the market today.

The Federal Reserve cannot be America’s entire housing policy

Wednesday’s Federal Reserve decision maintained the benchmark federal funds target range at 3.75% to 4%. Two policymakers dissented because they preferred a quarter-point increase.

Given Thursday’s inflation figures, the central bank faces a difficult challenge. Inflation remains above its 2% objective even as residential activity weakens. Price stability matters: persistent inflation can erode purchasing power and keep long-term borrowing costs elevated.

I would welcome lower mortgage rates. So would nearly everyone involved in residential transactions. But expecting the Fed to repair the housing market by itself is unrealistic.

Mortgage rates respond to longer-term Treasury yields, inflation expectations, mortgage-backed securities pricing and investor risk premiums. They do not automatically fall by the same amount as short-term policy rates.

And the Fed cannot accelerate a municipal permitting process, make more buildable lots available in a constrained market, provide water infrastructure or train additional skilled construction workers. Those are matters for elected officials, regulators and industry leaders.

Yet the national housing conversation repeatedly returns to interest rates as though every other obstacle were beyond anyone’s control. That is an inadequate substitute for a serious strategy.

Washington and the housing industry need a better measure of success

I want government officials judged against tangible results. How long does it take to approve a residential development? How much do financing delays and regulatory requirements add to the eventual purchase price? How many attainable homes are completed? How many qualified households can buy them without assuming unsustainable financial obligations?

Local governments should examine zoning restrictions, minimum lot sizes, parking mandates and permitting delays that can unnecessarily limit production. They must also plan for roads, schools, water and utilities. Approving homes without adequate infrastructure creates problems of its own.

State and federal policymakers should look closely at housing finance costs, land availability and obstacles preventing construction of smaller, less expensive properties. Consumer protection cannot be sacrificed in the process. Relaxing responsible underwriting standards or encouraging more debt is not a sound affordability policy.

Nor is subsidizing demand without considering supply. Additional assistance can help some qualified households, but where listings are scarce it can also intensify competition for the same limited number of properties.

Our own industry has responsibilities, too. Mortgage professionals should explain the full cost of ownership, including taxes, insurance and the limitations of financing incentives. The familiar advice to buy now and refinance later is not a dependable financial plan; nobody can guarantee when refinancing will be affordable or available.

Real estate agents should be candid about pricing, inventory and local market conditions. Builders should be transparent about mortgage-rate buydowns and the total economics of the incentives they offer. Professionals owe buyers sober guidance, especially when budgets are stretched.

A growing economy should create a better opportunity to own a home

The American economy has demonstrated considerable resilience. Thursday’s 3.4% GDP growth figure deserves recognition.

But people do not experience the economy through a quarterly percentage. They experience it through paychecks, living expenses, employment prospects and the major financial decisions they can afford to make.

For generations, homeownership has been one of the principal means by which American families established financial security and accumulated wealth. That pathway is becoming more difficult for many households.

There will be no single solution. Lower inflation, more efficient housing production, responsible financing and a greater supply of appropriate homes all matter. Conditions vary from region to region, and policy should acknowledge those differences.

Still, the warning is clear: an economy can grow rapidly while the market for one of its most important household investments struggles.

Americans should not be asked to celebrate economic success indefinitely while the possibility of owning a home moves further beyond reach.

If 3.4% economic growth cannot coexist with a healthier housing market, we need to examine more closely who benefits from that growth, what prevents housing from participating, and whether policymakers are prepared to be accountable for the results.

That is the debate America should be having.

John G. Stevens is the publisher of WRE News. The views expressed in this column are his own.