New tariffs took effect today, adding pricing uncertainty to an already fragile housing environment marked by rising cancellations and slower construction timelines. The new round of trade actions have introduced added pricing uncertainty, especially for materials tied to global supply chains. Construction timelines and pricing strategies have already shifted, as material inflation moves faster than expected. While the full scope of trade impacts is still unfolding, the expectation of higher material and component costs is adding new strain across the construction sector.
Compounding the pressure, a new demand-side disruptor is emerging: data center construction. As LightBox’s Head of Data Strategy, Manus Clancy flagged in the latest CRE Weekly Digest, these massive projects are soaking up construction labor, power, and financing; resources that housing developers depend on. As Clancy put it, developers must now ask whether data center growth could drive up labor costs or delay multifamily and single-family builds.
Pending Sales Signal Growing Buyer Caution
June’s pending home sales declined 0.8% from the previous month and 2.8% year-over-year, according to the National Association of REALTORS®. While the drop was modest, it aligned with a growing body of data from builder earnings and government releases showing a market slowing by design.
More buyers are entering contracts only to step away mid-process once mortgage rate spikes, appraisal gaps, or inspection issues emerge. Redfin reports that in June, 14.9% of pending home sales nationwide were canceled, the highest rate for any June since they began tracking in 2017, often driven by affordability surprises or buyer hesitation when costs escalate.
Real estate agents in markets like Orlando and Miami describe buyers retreating during inspection periods or after re-evaluating total monthly payments, highlighting how even small increases can derail deals in the current financial environment.
This measured pullback is consistent with signals from homebuilder earnings and June construction data, all of which point to a market leaning toward caution.
“Everyone is still in the game, but the sidelines are getting more crowded,” said Manus Clancy, head of Data Strategy at LightBox. “Buyers are showing up, but more are walking away when the terms no longer work. Builders, in turn, are pulling back on completions and focusing their capital on backlogs and margin protection.”
Key Market Signals from July
July’s housing data and builder commentary point to a market responding in real time to cost pressures, rate sensitivity, and uneven buyer behavior. Builders are slowing completions, pushing new multifamily starts, and holding firm on backlog execution. Incentives remain essential to getting deals done, and cancellations are trending higher. Pricing hasn’t broken, but neither has demand, making this a cycle defined by friction and control.
| Trend | Signal from July |
| Completions slowing | Total completions down 14.7% month over month and 24% year over year |
| Single-family starts weakening | Down 4.6% from May as builders prioritize backlog and margin discipline |
| Multifamily starts rising | Up 30.6% month over month, but future deliveries still expected to fall |
| Buyer cancellations increasing | D.R. Horton cancellation rate rose to 17%; pending sales fell 0.8% |
| Incentives remain widespread | Builders say rate buydowns and credits are needed to close deals |
| Construction costs climbing | Input prices up 2.1% year over year; more tariff pressure expected in August |
| Resource constraints intensifying | Rising data center construction is absorbing labor, capital, and power; draining resources, increasing costs, and complicating timelines for residential developers |
Builder Earnings Reflect Resilience but Rely Heavily on Incentives
Upbeat quarterly results from D.R. Horton and PulteGroup gave investors reason for confidence last week. Both builders exceeded expectations on revenue and earnings, but the calls made clear that topline strength is not translating into aggressive growth. Instead, each company reflected a housing market still defined by buyer affordability strain, selective demand, and a measured pace of execution.
Incentives remain central to the sales strategy at both firms. Mortgage rate buydowns, pricing adjustments, and closing cost assistance continue to serve as critical tools for keeping deals intact. Pulte executives noted that incentives are still widely used to convert interest into closings, and D.R. Horton CEO Paul Romanowski described demand as “still weak” and said he expects “incentives to remain elevated and increase further during the fourth quarter.”
Both companies also acknowledged that buyer selectivity is increasing. Pulte pointed to regional disparities in pricing power, while Horton reported a 17% cancellation rate, up from 16% in the previous quarter, and narrowed its full-year revenue and delivery guidance to reflect persistent affordability pressure.
“When a builder tightens its guidance, it’s not always a red flag,” said Clancy. “It reflects how carefully the largest players are calibrating to rate sensitivity and softening buyer momentum. The focus right now is preserving margin and managing delivery risk.”
The two builders emphasized stable backlogs and disciplined cost control in their earnings releases. Horton’s earnings release noted a maintained gross margin of 21.8% amid flat orders and fewer closings. PulteGroup highlighted a backlog of approximately 10,779 homes worth $6.8 billion and reiterated its focus on matching production with actual demand.
Builders Slow Delivery as Completions Fall Across Product Types
June marked a steep drop in residential completions, pointing to a broader shift in builder strategy. Total housing completions fell 14.7% from May and 24% from a year earlier, according to the U.S. Census Bureau. Single-family completions were down 11.1% month over month, while multifamily completions dropped 20.3%.
The slowdown in delivery reflects a shift toward margin protection and risk management. After a period of aggressive construction starts in 2023 and early 2024, builders are now exercising more control over timing. Delays in permitting, construction financing constraints, and uncertain buyer absorption are leading developers to slow the pace at which projects are brought to market.
“Builders are clearly responding to the risk environment,” said Dianne Crocker, research director at LightBox. “They’re managing inventory, leaning on incentives, and slowing deliveries where absorption is less certain.”
Recent reporting also suggests that rising construction costs and tariff-related uncertainty are contributing to the pullback. Construction input prices rose 0.2% in June, driven by increases in copper and fabricated structural metal products, according to an analysis by Associated Builders and Contractors using Bureau of Labor Statistics data. Overall input costs were 2.1% higher than a year earlier. With additional duties taking effect today, August 1, builders are bracing for increased price volatility, particularly for materials like steel and aluminum.
New Starts Show a Split Between Multifamily and Single-Family
June’s construction data pointed to a clear divergence in builder activity. While total housing starts rose 4.6% from May, the increase came entirely from the multifamily side. Starts for buildings with five or more units jumped 30.6% month over month and 25.8% year over year, according to the U.S. Census Bureau. Single-family starts, in contrast, fell 4.6% from the previous month.
The trend reflects a tactical split in builder confidence. Single-family construction is slowing as affordability ceilings, cancellation rates, and underwriting constraints limit the path to closings. Builders are prioritizing backlog management and using incentives to hold margins in place, not ramping speculative activity.
Multifamily starts suggest long-term faith in renter demand, particularly in growth markets. But that optimism is tempered by what’s happening further down the pipeline. Despite the spike in June starts, apartment construction volume is still down 37% from last year, and deliveries are projected to decline another 34% over the next 12 months. Projects are still moving forward, but delivery schedules and cost hurdles are shaping how and when they hit the market.
What August Will Reveal
The dog days of summer won’t bring a lull for builders. August will be a test of how well builders can adapt to rising input costs, resource constraints, and cautious buyer behavior. Labor data and home sales reports will shape decision-making across the second half of the year. Pricing power, absorption risk, and resource availability are all in flux.
“We’re in a window where execution is everything,” said Clancy. “Builders can’t count on volume, and buyers can’t count on rates moving quickly. Everyone is pricing risk in real time, and August may be when we see who holds the line and who steps back.”
