Pre-Election Survival Guide for Homebuilders Amid Uncertainty

John McManus -

In the run-up to the November 2024 presidential election, the U.S. homebuilding industry finds itself confronting a volatile confluence of economic, political, and housing market forces that have left many builders in a state of strategic limbo. With affordability challenges worsening, buyers increasingly deferring their home purchases, and the Federal Reserve's interest rate policies creating further uncertainty, homebuilders must take a proactive approach to navigate the uncertain months ahead.

I just caught up with Dan White, Lead Market Strategist at New Home Star, about the potential outcomes of the election, how builders can adapt, and why some of the conventional wisdom around buyer sentiment may not hold in the current environment.

Buyer Sentiment and Deferral Mindset

At the core of the uncertainty is what Dan White calls the "deferral mindset," which has impacted many homebuyers' decision-making process. He notes that while some buyers are genuinely concerned about the upcoming election's impact on the economy and housing market, most are more focused on their personal financial situation.

At the core of it, buyers are concerned about how the election is going to impact their personal economy," says White. "It’s less about the political nature or any one candidate. It’s more about how this is going to impact me personally."

In the homebuying process, White emphasizes that builders and their sales teams often project their own concerns about the election onto buyers, overestimating its influence on the decision-making process. Research shows that only a small fraction of homebuyers are delaying their purchases precisely because of the election. According to White, the majority are more concerned with affordability —particularly with the hope that mortgage rates will soon decline.

The Impact of Federal Reserve Policy

The Federal Reserve's pivot on its policy rate in September 2024, signaling confidence that inflation is being contained, brought some relief. Yet, mortgage rates remain historically high, hovering well above 6%, which continues to erode affordability. As a result, many prospective buyers have opted to wait for a drop in interest rates or a decline in home prices before purchasing.

White points out the challenge of this deferral strategy:

We do think interest rates are going to continue to go down. We are seeing buyers on the sidelines, some of whom have been there for months or even years, waiting for this moment. But we’re also in an environment with very limited supply, and when demand increases while supply stays the same, that equals a price increase."

This dynamic, where buyers wait for better rates while prices continue to rise due to low inventory, has created a tension between short-term affordability concerns and long-term price appreciation. White’s advice to builders is to coach potential buyers through these complex decisions, emphasizing the benefits of locking in a home purchase now rather than risking future price hikes.

Housing Policy in a Post-Election Landscape

As both major candidates for the presidency have made housing affordability a key platform issue, White believes there is reason for cautious optimism. Both campaigns have acknowledged the severity of the housing crisis. Still, they offer different solutions — ranging from tax incentives for first-time buyers to supply-side measures aimed at reducing regulatory barriers.

Both parties agree that the housing affordability crisis is of paramount importance, which is somewhat unique to this election cycle," White says. "While the candidates have different ways they want to tackle the issue, the fact that it’s a key priority for both should give some confidence to homebuyers and builders alike."

For builders, the expectation is that some form of government intervention – whether through tax incentives or easing regulatory constraints — will provide a tailwind to the market. However, White also cautions that these policies often take time to fully realize, and builders should not expect immediate relief from the new administration, regardless of the outcome.

What Builders Should Be Doing Now

White stresses the importance of inventory management as a critical strategy for builders to survive and thrive in the current environment. Builders with well-positioned inventory, particularly at more affordable price points, have captured buyers who are still in the market despite the uncertainty.

Builders that have been able to build inventory strategically have been very well-positioned," White notes. "When a buyer can see that a house is 30, 60, or 90 days away from completion, that feels more real and stable to them compared with a home that won't be done for six, 12, or more months."

With demand likely to increase as interest rates begin to tick down, White advises builders to take calculated risks by maintaining a steady stream of inventory at different stages of completion. He also highlights the importance of offering competitive mortgage incentives—such as rate buy-downs—but in a way that is tailored to specific buyer profiles.

Data-Driven Strategies to Match Buyer Profiles

One of the key themes White emphasized during our conversation is the need for builders to use data-driven strategies to personalize their offerings. This includes not only understanding buyer demographics but also tailoring incentives based on the specific needs of those buyers.

We’ve seen that a one-size-fits-all incentive strategy is no longer as effective. Builders need to be smarter about matching their incentives to the specific needs of their target consumer profile," White says.

For example, younger buyers may focus more on out-of-pocket costs like down payments, while more mature buyers may prioritize mortgage rates and long-term affordability.

The data and tools are available for builders to create these tailored strategies, White notes, and those who leverage this technology are better positioned to win in this competitive market.

What to Expect Moving Into 2025

Looking ahead to 2025, White anticipates a period of stabilization, but with continued uncertainty as policy proposals from the new or continuing administration begin to take shape. While he is optimistic that the broader housing market will stabilize in terms of pricing, interest rates, and affordability, he acknowledges that it will take time.

I think everyone is hoping for a sense of stability and normality," says White. "While we may not see dramatic shifts in policy overnight, I think we will begin to see a return to more historical norms in terms of days on market, price appreciation, and interest rates."

For homebuilders, the focus should remain on tactical decisions — whether it’s managing inventory, personalizing incentives, or using data to refine strategies—and staying nimble in a market that remains uncertain.

As we approach the end of 2024 and prepare for a new political landscape, the challenges facing homebuilders are undeniable. But with strategic planning, data-driven decision-making, and a focus on maintaining flexibility, builders can continue to navigate this complex environment and come out ahead.

It’s going to take a delicate balance of strategy, flexibility, and innovation to succeed in this market," says White. "But with the right approach, builders can turn these challenges into opportunities."

As homebuilding leaders reflect on what lies ahead, now is the time to act — not to wait — on strategies that can carry them through this volatile period and into a more stable 2025.