Homebuilders are still waiting for the COVID fog to lift, but the virus is no longer the culprit.
The fundamental problem affecting the Texas real estate market is known in behavioral science as bias. Buyers, sellers, analysts and homebuilders sometimes still treat pandemic-era rates as a constant reference point.
That backward thinking turns good planning into bad timing.
Yes, the common refrain, “prices are up,” is true, but the changes are much deeper. The financial world has changed, and the housing machine now operates with different physics, with higher monthly payments, less inventory and buyers who buy with a down payment.
Fog is nostalgia with a spreadsheet
In Texas, we respect history, but we don’t write it down. The fog of COVID is emerging when decision makers are treating 2.65% of mortgages from January 2021 as a standard frame of reference rather than what it was, the extreme, uncontrolled emissions created by the policy response to the crisis.
Mortgage rates rose more than five percent in that basket, reaching 7.79% in October 2023 and falling to about 6.2% in September 2024. When you keep comparing it to 2.65%, the whole deal feels “broken for a while,” which is a good way to stop making decisions.
The biggest competitor for the Texas builder in 2026 isn’t another builder – it’s consumer memory.
Payment shocks are real, and measurable
Builders live and die by affordability, and affordability is measured in monthly payments.
The Consumer Financial Protection Bureau provided a simple example: on a $400,000 mortgage, principal and interest payments were $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 were lowered to about 6.2% (Sept 2024), the payout was still $2,450, about $838 more than the trough (about 52% more).
Home prices are up, too.
In the same CFPB table, the national median sales price increased 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 rise, buyers feel that the market “doesn’t make sense” because the payment doesn’t make sense.
If you sell homes as if it’s a price negotiation, you lose buyers who are in the payment negotiation.
Locked-in hunger resale, which creates a double bind
Higher prices not only reduced consumer affordability; they have reduced the supply. The CFPB notes that higher rates mean fewer homes are available for sale because homeowners locked into low-cost mortgages are reluctant to move, thus creating a “lock-in effect.” In other words, the resale market is stuck with fewer listings, fewer moves and fewer “natural” trades.
For community builders, that creates an odd two-step process.
Strong resale inventory can push buyers to new construction, especially if you can’t afford lower prices or building incentives. But it can also trap potential upstream buyers in the area, narrowing the pool for higher-value products unless you resolve payment and trade friction. Foreclosures don’t just block homeowners; set up your funnel.
A policy hangover that has boosted the base
Part of the reason the market feels distorted is that it is distorted. The Brookings Institution notes that during the 2020-to-2022 QE period, the Fed bought $1.33 billion of agency-backed securities, which accounted for nearly 90% of the agency’s MBS growth during that window.
The same Brookings piece describes how home prices “soared” then and “soared” after QE ended, and posits the role of housing as central to the post-COVID-inflation jag.
The active point of the builders is not politics; it’s basic. That period of policy pushed up demand, raised commodity prices, and issued many households with handcuffed gold bonds. Then the cycle reversed, leaving the industry scrambling to price, forecast and build after the quake.
We didn’t just come out of COVID; we came out of an artificially low standard that re-instated the consumer’s expectations, that is, we fixed them on a passing, false standard.
Level-set
The fog clears when you stop waiting for “normal” and start working “now.” The CFPB’s similar analysis emphasizes the validity of affordability. By the end of 2023, principal and interest on a median-priced home had risen to about $2,891 (down 5%) as prices increased. The CFPB notes that for the average family, buying a median home will require a much higher share of income than during the low-income period, unless incomes rise significantly, prices fall in the 2.5% range, or prices drop significantly.
The builder’s playbook must be sharp and uncharitable. Write down pay bands, not just price points; the buyer is emotionally qualified before he is qualified with the lender. Treat incentives as a product strategy, not end-of-quarter panic; if a $400,000 loan payment changes by hundreds of dollars with a price move, the financing instruments are part of the “clarification.” Organize resale conflicts; the lock-in effect means that the profit will not “reverse” just because you want it to. Develop scenarios, not predictions; the post-2020 world punishes one-point certainty, especially if rates and spreads can move faster than construction cycles.
The market is not due for 2021 absorption; you owe your shareholders a 2026 plan.
The new normal mantra
Texas builders don’t need more hope from the pro forma; they need fresh ideas. Rates may drop, but the CFPB’s own calculations show that getting back to compliance by 2021 would require an extreme move (rates closer to 2.5% or much lower rates), and that’s not a case of planning; it is a prayer.
Build a buyer you own. Be apathetic about paying, skeptical, and tired of being told to wait for a better world. When you price and market in today’s payment reality, you don’t just sell homes; you are taking market share from your competitors who are still competing with the past.
