Homebuilders
are
still
waiting
for
the
COVID
fog
to
lift,
but
the
virus
is
no
longer
the
culprit.

A
fundamental
issue
affecting
the
Texas
housing
market
is
known
in
behavioral
science
as
an
anchoring
bias.
Buyers,
sellers,
analysts
and
even
homebuilders
sometimes
still
treat
pandemic-era
rates
as
a
fixed
point
of
reference.

That
backward-looking
mindset
is
turning
good
planning
into
bad
timing.

Yes,
the
common
refrain,
“rates
went
up,”
is
true,
but
the
changes
run
deeper.
The
financing
regime
has
flipped,
and
the
housing
machine
now
runs
on
different
physics,
with
higher
monthly
payments,
thinner
resale
inventory
and
buyers
who
shop
by
payment
first.

The
fog
is
nostalgia
with
a
spreadsheet

In
Texas,
we
respect
history,
but
we
don’t
underwrite
it.
The
COVID
fog
shows
up
when
decision-makers
treat
the
2.65%
mortgage
trough
from
January
2021
as
a
normal
frame
of
reference
rather
than
what
it
was,
an
extreme,
unsustainable
outlier
created
by
a
crisis
policy
response.

Mortgage
rates
rose
more
than
five
percentage
points
from
that
trough,
reaching
7.79%
in
October
2023
and
easing
to
about
6.2%
by
September
2024.
When
you
keep
benchmarking
against
2.65%,
every
deal
feels
“temporarily
broken,”
which
is
a
nice
way
of
saying
you
stop
making
decisions.

The
biggest
competitor
to
a
Texas
builder
in
2026
is
not
another
builder
–
it’s
the
buyer’s
memory.

The
payment
shock
is
real,
and
it’s
measurable

Builders
live
and
die
by
affordability,
and
affordability
is
measured
by
monthly
payments.

The

Consumer
Financial
Protection
Bureau
provided
a
simple
example:
on
a
$400,000
loan,
principal-and-interest
payments
were
about
$1,612
at
2.65%
(Jan
2021)
and
$2,877
at
7.79%
(Oct
2023),
a
jump
of
$1,265,
or
about
78%.
Even
after
rates
eased
to
around
6.2%
(Sept
2024),
the
payment
was
still
about
$2,450,
roughly
$838
higher
than
the
trough
(about
52%
higher).

Home
prices
rose,
too.

In
the
same
CFPB
table,
the
national
median
sales
price
rose
from
about
$355,000
in
January
2021
to
$423,200
in
October
2023
and
to
about
$412,300
in
September
2024.
When
both
home
prices
and
financing
costs
are
surging,
buyers
feel
the
market
“doesn’t
make
sense”
because
the
payment
doesn’t.

If
you’re
selling
homes
like
it’s
a
price
conversation,
you’re
losing
buyers
who
are
in
a
payment
conversation.

Lock-in
starves
resale,
creating
a
double-bind

Higher
rates
haven’t
merely
reduced
buyer
affordability;
they
have
weakened
supply.
The
CFPB
notes
that
higher
rates
mean
fewer
homes
are
available
for
sale
because
homeowners
who
locked
in
low-rate
mortgages
have
become
hesitant
to
move,
thereby
creating
a
“lock-in
effect.”
In
other
words,
the
resale
market
gets
sticky
with
fewer
listings,
fewer
moves
and
fewer
“natural”
trade-ups.

For
public
builders,
that
creates
a
weird
two-step.

Tight
resale
inventory
can
push
shoppers
toward
new
construction,
especially
when
you
can
buy
down
rates
or
structure
incentives.
But
it
can
also
trap
would-be
move-up
buyers
in
place,
shrinking
the
pool
for
higher-priced
products
unless
you
actively
solve
payment
and
trade
friction.
Lock-in
doesn’t
just
freeze
homeowners;
it
freezes
your
funnel.

The
policy
hangover
that
inflated
the
baseline

Part
of
the
reason
the
market
feels
distorted
is
that
it
was
distorted.
Brookings
Institution
documents
that
during
the
2020–to–2022
QE
period,
the
Fed
purchased
$1.33
trillion
of
agency
mortgage-backed
securities,
accounting
for
nearly
90%
of
the
growth
in
agency
MBS
during
that
window.

The
same
Brookings
piece
describes
how
home
values
“soared”
during
that
period
and
then
“plateaued”
after
QE
ended,
and
it
frames
housing’s
role
as
central
to
the
post-COVID
inflation
jag.

The
practical
point
for
builders
isn’t
politics;
it’s
the
baseline.
That
policy
era
pulled
demand
forward,
inflated
asset
values,
and
handed
many
households
golden
handcuff
mortgages.
Then
the
cycle
reversed,
leaving
the
industry
trying
to
price,
forecast
and
build
in
the
aftershock.

We
didn’t
just
come
out
of
COVID;
we
came
out
of
an
artificially
low-rate
environment
that
rewired
buyer
expectations,
i.e.,
anchored
them
to
a
fleeting,
false
benchmark.

The
level-set

The
fog
clears
when
you
stop
waiting
for
“normal”
and
start
operating
in
“current.”
The
same
CFPB
analysis
underscores
the
reality
of
affordability.
By
late
2023,
principal
and
interest
on
the
median-priced
home
rose
to
about
$2,891
(with
5%
down)
as
rates
peaked.
The
CFPB
notes
that
for
a
typical
household,
affording
the
median
home
would
require
a
much
higher
share
of
income
than
during
the
low-rate
period,
unless
income
rises
sharply,
rates
fall
toward
the
2.5%
range,
or
prices
drop
substantially. 

The
builder
playbook
must
become
sharper
and
less
romantic.
Underwrite
to
payment
bands,
not
just
price
points;
the
buyer
qualifies
emotionally
before
they
qualify
with
the
lender.
Treat
incentives
as
product
strategy,
not
end-of-quarter
panic;
if
a
$400,000
loan’s
payment
swings
by
hundreds
of
dollars
with
rate
moves,
financing
tools
are
part
of
the
“spec.”
Plan
for
resale
friction;
the
lock-in
effect
means
turnover
won’t
“snap
back”
just
because
you
want
it
to.
Run
scenarios,
not
forecasts;
the
post-2020
world
punishes
single-point
certainty,
especially
when
rates
and
spreads
can
move
faster
than
build
cycles.


The
market
doesn’t
owe
you
2021
absorption;
you
owe
your
shareholders
a
2026
plan.

A
new-normal
mantra

Texas
builders
don’t
need
more
hope
in
the
pro
forma;
they
need
cleaner
assumptions.
Rates
may
drift
lower,
but
the
CFPB’s
own
math
shows
that
returning
to
2021
affordability
would
require
extreme
moves
(rates
near
2.5%
or
sharply
lower
prices),
and
that’s
not
a
planning
case;
it’s
a
prayer.

Build
for
the
buyer
you
have.
Become
payment-sensitive,
skeptical,
and
tired
of
being
told
to
wait
for
a
better
world.
When
you
price
and
market
to
today’s
payment
reality,
you
don’t
just
sell
homes;
you
take
market
share
from
competitors
still
arguing
with
the
past.