No Pit Stops: Homebuilders Must Pivot And Retool In Real-Time

Homebuilding leaders compete amidst a tale of two markets: one that is brutally murky and another that is defining in a crystal clear, existential way.

Existing home sales have fallen to a nine-month low of 3.93 million units, and new-home sales—holding at a tepid 627,000 annualized pace—remain 6.6% below last year’s levels, according to recent U.S. Census and NAR data.

Mortgage rates, which have remained near 7%, are squeezing affordability, while stubbornly high new-home prices keep many first-time buyers sidelined.

It’s not just math, though high rates and elevated prices are two of the immovable forces weighing on demand. The third, perhaps even more insidious force is psychological: a growing conviction among buyers that prices will fall further before stabilizing.

Even aggressive incentives, concessions, and mortgage buy-downs are failing to shake that perception in many markets.

The Big 3—D.R. Horton, Lennar, and Pulte—are exhibiting three distinct responses. Horton is using its scale to squeeze costs and dominate the entry-level segment. Lennar is relying on volume-first “even-flow” construction and double-digit incentive loads to maintain sales momentum. Pulte, by contrast, is holding the line on pricing, prioritizing margins, and focusing on higher-value segments, such as active adult and move-up buyers.

For private builders, the takeaway is stark: to survive, and effectively counter-punch the big, public nationals, no single tactic will work on its own. Success now requires a “both-and” approach—making tactical pivots to survive today’s price wars and consumer hesitation, while simultaneously reengineering operational workflows for long-term resiliency.

Affordability Crunch Meets Buyer Hesitation

The numbers convey a sobering reality. The total existing-home inventory is up 15.9% year over year, resulting in a 4.7-month supply. Meanwhile, new-home inventory sits near a 9.8-month supply, with 114,000 homes completed and ready to occupy—a 21% jump compared to last year.

Yet sales pace remains slow, dangerously so in some markets that now show a glut of standing speculative inventory.

“Higher-for-longer” mortgage rates—hovering between 6.5% and 7%—have clipped purchasing power for first-time and middle-income buyers. The sharp increase in median new-home prices over the past five years—from $330,900 in 2020 to $420,300 in 2024—has further eroded affordability. Only 14% of new homes are priced below $300,000, down from 40% just five years ago.

In markets like Florida, Texas, and certain parts of California, spec inventory is rising faster than buyers can, or choose to, absorb it. The pressure to cut prices is mounting. Robert Dietz, NAHB’s chief economist, notes that 38% of builders cut prices in July 2025, with an average reduction of 5%.

The use of sales incentives was 62% in July, unchanged from June,” Dietz adds, underscoring the industry’s reliance on costly giveaways to keep order pace steady.

This environment leaves private builders vulnerable. Without the deep pockets or flexible financing of their public counterparts, they risk margin erosion or worse if they can’t reduce cycle times and operational costs.

Three Paths Through the Storm

The industry’s top three builders by volume—D.R. Horton, Lennar, and Pulte—are mapping very different strategies, each revealing key lessons for the rest of the market.

Lennar: Volume-first, asset-light.

Lennar is utilizing its “even-flow” construction model and offering double-digit incentives (13% in Q2) to maintain high sales velocity. Its Millrose land spin-off exemplifies the company’s asset-light approach, which reduces risk exposure while sustaining pipeline flexibility. But this strategy is margin-thin. Lennar’s gross margins sit at 22.3%, well below Pulte’s.

D.R. Horton: Scale advantage.

Horton is leveraging its massive scale to negotiate costs, control material flows, and maintain its position as the dominant entry-level builder. Its margins of 21.8% rely on cost-cutting rather than heavy discounting. Smaller builders cannot replicate Horton’s procurement leverage.

Pulte: Margin-first, confidence-driven buyers.

Pulte’s strategy is the most contrarian—and perhaps the most instructive.

There’s inelasticity in pricing, and more incentive doesn’t necessarily translate into incremental volume,” says CEO Ryan Marshall.

By targeting move-up and active adult buyers—segments less sensitive to interest rates—Pulte has held incentives to 8.7% while maintaining gross margins at 27%, the highest among the Big 3.

Private builders who cannot compete on price or scale will need to examine Pulte’s approach more closely—optimizing product mix, leaning into value-added segments, and maintaining discipline on land and operational costs.

'Tech Debt Masquerading As Process'

In today’s environment, simply cutting prices or chasing volume is a short-term fix. Long-term survival—and the ability to compete with and around the Big 3—requires a more profound transformation: moving from fragmented workflows to integrated systems.

This is where the concept of the digital thread becomes critical. Anthony Zuefeldt, solutions consultant at Higharc, defines it as “more than just a technical ambition—it’s an operating philosophy.”

The digital thread is how builders unlock better scale and pivot faster to market shifts,” Zuefeldt says. “It connects design, estimating, construction, and sales in real time, creating a single source of truth. That’s how you reduce cycle time, cut costs, and avoid the rework that kills margins.”

Most builders today still rely on a patchwork of spreadsheets, siloed software, and manual takeoffs—an approach Zuefeldt calls “tech debt masquerading as process.” In contrast, connected platforms like Higharc unify design, purchasing, and estimating, enabling instant updates across every downstream process.

When product data is centralized and linked, it’s no longer static—it’s actionable,” Zuefeldt says. “That’s how you can move from idea to pro forma to sales-ready product in days, not months.”

For smaller builders, this isn’t a luxury. It’s a survival strategy. Every dollar saved on rework or inaccurate takeoffs is a dollar that can be used to fund incentives or lower the base price.

Section 4: Why Now—The Inflection Point for Transformation

The current slowdown is a double-edged sword. On one hand, it’s painful—order pace is soft, and carrying costs on unsold inventory are rising. On the other hand, it’s an opening: builders have breathing room to rethink their operating models before the next upcycle.

The biggest mistake is waiting for the market to recover before making these changes,” Zuefeldt warns. “Digital transformation is like moving from a series of loose gears to a synchronized engine. It takes time to implement, but the ROI—shorter cycle times, fewer errors, better buyer experience—is real.”

This is not about replacing people with technology. It’s about enabling teams to focus on higher-value work.

The current paradigm forces teams to rely on A players performing flawlessly every day,” Zuefeldt notes. “That’s not sustainable. A connected system reduces the burden on individuals and makes excellence repeatable.”

Section 5: Takeaways for Private Builders

• Adopt a Both-And Strategy. Tactics like incentives or price adjustments are necessary but not sufficient. Builders must also re-engineer the design, estimation, and construction of homes.
• Invest in Product-Market Mix Shift. Pulte’s success with active adult buyers shows that confidence-driven segments can provide margin stability even in a price-sensitive market.
• Cut Waste, Not Corners. Digital thread systems allow builders to track every door, window, and board, enabling leaner takeoffs and fewer cost overruns.
• Act While It’s Quiet. Retooling during a slowdown means being ready to hit the ground running when demand rebounds.

The market punishes inefficiency,” Zuefeldt says. “Builders who rewire their workflows now will be in a stronger position—not just to survive 2025, but to flourish in 2030 and beyond.”