New federal construction data and a 14-year low in builder confidence point to a growing tension in the housing market: builders have reason to slow production today, but new-construction expert Lori Lane says prolonged pullbacks could create a very different supply problem later.
By Susan Rogers
Homebuilders are facing a difficult contradiction.
They are being asked to produce the housing America needs for the future while confronting a market that is making it increasingly difficult to sell the homes they are building today.
New federal data released Oct. 20 show that single-family housing starts fell 4.6% in September to a seasonally adjusted annual rate of 859,000. Perhaps more significant for future construction, single-family building permits declined 4% to an annualized 845,000. Overall housing starts were down 5.2% from August, according to the U.S. Census Bureau.
The monthly changes in starts carry wide margins of error and should not be treated as proof of a long-term trend. But combined with a second report released just one day earlier, the numbers raise a larger question about where housing supply goes from here.
For Lori Lane, President and CEO of LLANE & Co., that question deserves attention now.
“We have spent years talking about America’s housing shortage,” Lane said. “Now we’re watching builders pull back because they are facing a much more difficult environment in which to sell and produce homes. If that continues for an extended period, we risk solving today’s inventory problem by creating tomorrow’s supply problem.”
Builder Confidence Is Sending Its Own Warning
On Oct. 19, the National Association of Home Builders reported that builder confidence in the market for newly built single-family homes fell three points to 29, its lowest level since June 2012.
Prospective buyer traffic dropped to 18, while 43% of builders reported cutting prices, the highest share recorded during the 2020–2026 period, and 65% said they were using sales incentives.
Lane says those conditions make decisions to slow starts understandable.
“Builders cannot ignore what is happening in front of them,” Lane said. “They have capital at risk, inventory to sell, higher construction costs and buyers who are taking longer to make decisions. Pacing starts to actual demand is responsible business.”
The concern, she says, comes when a short-term response becomes a prolonged reduction in the future housing pipeline.
Today’s Inventory Is Not Tomorrow’s Supply
One of the easiest mistakes to make in the current market is assuming that because some areas have more homes available today, the housing supply problem has been solved.
It has not necessarily been solved. It has changed.
Existing completed inventory, homes currently under construction, permits for future homes and land being entitled for developments years from now represent very different stages of the housing pipeline.
“People tend to look at inventory as one number,” Lane said. “But a completed home sitting on the market today and a community that needs two or three years of planning, infrastructure and development before its first closing are two completely different things.”
That distinction is particularly important in new construction because supply cannot simply be turned back on when buyer demand improves.
Land has to be acquired. Communities must be planned and entitled. Roads and infrastructure need to be built. Product must be designed and priced. Permits have to be secured before vertical construction even begins.
“If demand strengthens twelve months from now, a builder cannot suddenly manufacture years of development work overnight,” Lane said.
Housing Supply Is Also Highly Local
Lane cautions against treating national construction numbers as though every market, or every buyer segment, faces the same conditions.
Some Atlanta submarkets may have sufficient near-term inventory, while others could face longer-term shortages of attainable housing, appropriately designed active-adult communities or homes that reflect changing demographic needs.
That is why Lane believes builders and developers have to make highly specific decisions rather than applying a blanket “build” or “don’t build” strategy.
“The question isn’t whether every builder should keep producing at the same pace,” she said. “The question is where demand will exist, what buyers will need and which opportunities are important enough that we continue positioning for them even while today’s market is challenging.”
Lane’s perspective is grounded in the communities she works with every day through LLANE & Co., including Patrick Malloy Communities. Her work spans both homes being sold now and developments that require years of planning, entitlement and construction before they ever reach the market.
That gives her a practical view of the tension between immediate sales performance and the long-term development decisions that ultimately determine future housing supply.
Lane has spent more than two decades working with builders and developers on the sales and marketing of more than 400 new-home communities. Her work spans traditional new construction, luxury housing and active-adult communities throughout Greater Atlanta.
“That’s why you can’t look at a slower sales month and make every future development decision based on what is happening today,” Lane said. “Some of the communities buyers will need several years from now have to be planned now.”
Affordability Has a Supply Side, Too
The current environment presents another contradiction.
High borrowing costs have weakened buyer demand, while builders are cutting prices and using incentives to make homes more attainable. At the same time, declining starts and permits mean fewer homes may enter the future pipeline if those trends continue.
“You cannot solve housing affordability indefinitely by producing fewer homes,” Lane said. “Affordability is absolutely a demand-side issue today because of borrowing costs. But over the longer term, it is a supply issue too.”
The challenge for builders is balancing both realities.
That may mean carefully pacing speculative inventory while preserving strategic land positions. Continuing entitlements even when vertical construction slows. Revisiting product and price points. Identifying submarkets and buyer groups where demand remains durable. And resisting the temptation to make every long-term development decision based solely on current sales velocity.
For Lane, this is especially important in markets such as Atlanta, where housing needs vary significantly by geography and buyer profile.
“What makes sense in one submarket may not make sense in another,” she said. “The future need for attainable housing, luxury homes, active-adult communities or other product types is not going to be identical everywhere. Builders have to understand the demand they are planning for, not just the inventory they are carrying today.”
Planning for the Market After This One
No single month of housing-start data means another housing shortage is inevitable.
But falling single-family starts and permits arriving at the same time builder confidence reaches a 14-year low create a warning worth watching.
For Lane, the lesson is not that builders should ignore current conditions and keep building regardless of demand.
It is that housing has two timelines.
There is the market builders must survive today.
And there is the market they are creating for tomorrow.
“Builders have to respond to the market we have,” Lane said. “But we also have to remember that the decisions being made right now will determine how much housing is available several years from now.”
Today’s slowdown may be necessary.
The risk, Lane says, is allowing it to become tomorrow’s shortage.
