Builders push zero-down and rent-to-own deals as inventory stacks up
As mortgage rates stay stubbornly high and home prices continue climbing, real estate analyst Nick Gerli said the current US housing market is starting to show signs of trouble that resemble the 2008 housing crisis, especially in the new home construction sector.
“The country’s housing market is beginning to look a lot like 2008, at least for homebuilders,” said Gerli, CEO of real estate data firm Reventure App.
In high-growth markets like Florida and Texas, builders are having trouble selling completed homes. According to Gerli, a visit to a home construction site near Tampa revealed more than 20 vacant spec homes for sale, with signs advertising “zero down” mortgages. He noted that builders such as LGI Homes are now turning to rent-to-own strategies to move unsold inventory.
“Both of these anecdotes are hugely reminiscent of what we saw near the peak of the last bubble in 2007,” Gerli said in an interview with Newsweek.
Zillow listings show about a dozen new homes on the site Gerli visited, ranging from $286,000 to $383,000. According to Gerli, a builder’s agent said some of those homes may be converted into rentals so construction on the next phase can begin.
The shift from building to renting may make financial sense. While the median US rent in December fell to $1,594, its lowest level since March 2022, the median home sale price has climbed for 20 consecutive months, reaching $424,647 in February, up 3% from the previous year, according to Redfin.
Homebuilders across the country are now offering increasingly large incentives. Data from John Burns Research & Consulting shows that Lennar offered incentives equal to 13% of revenue on home deliveries last quarter – one of the highest levels in over a decade.
Despite mounting pressure and shrinking margins, builders are not pulling back.
“Their lots are overflowing. Their margins are getting heavily compressed. And they're doing rent-to-own,” Gerli said. “But they're still putting stakes in the ground and building new phases in these communities.”
That differs from the previous cycle, where construction activity slowed sharply ahead of the crash. “By this point in the last cycle the builders were starting to heavily cut back on single-family starts,” he said. “But today they’re still at 1.1 million annualized. Which is below mid-2000s levels, but still above pre-pandemic.”
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Homebuilding is also now more geographically concentrated. “Back in the mid-2000s there was a much more even distribution of starts,” Gerli posted on X. “Now the starts are almost exclusively in the South and certain Mountain States.” In February, builders started roughly 1.1 million homes in the South and West, compared to just 270,000 in the Northeast and Midwest combined.
Confidence among builders has also taken a hit. In February, the National Association of Home Builders (NAHB) reported its Housing Market Index fell to 42, down 5 points from January and 6 from a year earlier, marking a five-month low.
Much of the concern is tied to President Trump’s tariffs, which homebuilders fear could raise construction costs. Many in the industry have warned that tariffs on Canadian softwood lumber, a critical material in US homebuilding, could further depress new construction.
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