Home Builders Are Bleeding as Sales Run Dry, Workers Vanish

Henry:
Market’s always changing. Every week brings a new mix of data forecast and bold claims about where the real estate market is headed. Today, we’re taking a closer look at the headlines on our radar and the takeaways worth carrying forward and the ones you should just ignore. I’m James Dainard back with Kathy Fettke and Henry Washington to put on the latest stories into practical context. This is On the Market. Let’s get into it. Well, how are you guys doing, Kathy?

Kathy:
Good. I am in one of our rental properties trying to get it all fixed up and ready for sale or not. The market is horrible, so we might just rent it again and wait.

Henry:
Henry, how you doing, man? How’s the grind life of selling properties this week? I

James:
Closed on a couple sales, but I’ve been getting some good deals I’m excited about. So market’s a cycle. It’s either going to be easy to buy and hard to sell or hard to buy and easy to sell. And right now it’s hard to sell and easy to buy, and I’m a deal junkie, so I kind of like this time.

Henry:
Speaking of a lot of opportunities out there, I mean, Henry, you have an article on a bunch of vacant lots for sale? Yes,

James:
James. I have an article from PR Newswire, and it is stating that there are about 300,000 vacant lots for sale, which could close 6% of the housing shortage if anyone builds on them. So the article goes on to talk about that there are 300,242 empty lots, smaller than five acres that were listed for sale on Zillow in June of 2026. That represents about 17.4% of all sale listings. Building one home on each of these lots would reduce America’s housing deficit by 6.3%. That would bring it from 4.7 million down to 4.44 million. And a lot of the lots that are for sale are large enough to build more than one home on it. The more than 300,000 lots currently listed for sale represent the lowest hanging fruit in addressing the housing shortage in America. And I thought that was an interesting perspective because there is a lot of land for sale, but that doesn’t happen for no reason.
And so I’m cheating a little bit and really talking about two articles. The literal next article that I researched said that new home sales are at its weakest point since 2017, and that’s a Newsweek article. And that article is saying that new home sales were only up a modest 1.6% in June compared to a month earlier. But I’m not going to go on and babble about this article. Essentially what it’s saying is that builders and developers are struggling to sell the new homes they have right now. The lots that they are building on, they can’t seem to move the inventory like they want to. And that means they are bleeding money. And so yes, it may seem like because there’s 300,000 lots available that all someone needs to do is just go build a house on it. Just go build them. And then we’ll have solved the housing problem.
There are so many other problems that are tied to being able to solve the housing shortage. Affordability’s an issue. Interest rates are causing problems. People are worried about inflation and affording groceries. And so a lot of these homes that builders are building, they end up having to give away concessions and incentives to try to move the needle to get these products sold. I am a real estate investor. I buy distressed properties to flip. Over the last 60 days, I’ve had two different builders go onto my website. They clearly know who I am and what I do, and that I buy distressed properties. And they said, “We have new inventory. I have five homes coming up. Would you take a look and see what you can offer me?” If builders are reaching out to this guy, they are having a problem moving that inventory.

Kathy:
Yeah. But they really want to go out and build some more. Right. I mean, what’s funny to me about this article is that it says there’s a housing shortage of 4.7 million homes. The Trump administration said it’s 10 million. I’ve heard anywhere from three to 10 million. So no, 300,000 lots is not going to solve this problem, number one. Even if you put two houses on it, that’s 600,000. We’re not there. But yeah, how are you going to build those affordably? I’ve told you guys that in our subdivisions, we have to build 30% affordable. We want to. We want to build housing for the teachers and the firefighters and people who maybe are on fixed incomes. But as I’ve told you before, it cost us a million dollars to build an affordable home and we only are allowed to sell it for 350,000. The math, don’t math.
You have to make that difference up in the profits of the higher end. It’s very, very difficult to bring affordable housing on. So I don’t know what’s going on with these 300,000 lots, but I’m guessing that it’s tough to make it pencil.

James:
I think part of it too is people who have assets like land sitting empty where the economy wasn’t as tough, it was fine to just sit on a vacant lot, pay your taxes, and you’ve owned a piece of land. But if the economy gets tougher, I think a lot of people are like, huh, wonder how much we could get if we sell this little lot, get an extra piece of cash, help us be able to afford some more things. So I think you’re seeing some of that going on. I think you’re seeing people selling lots in vacation town communities who had pie in the sky ideas of building something in vacation towns, but second homes are declining right now. People can’t afford their first homes, nonetheless, a second home, nonetheless building a second home. And lastly, this isn’t even the only issue facing new construction.
Because like I said, when I was researching this, I came across a few articles and there is another article that talked about 300,000 construction job openings and no one to fill them. What?
So there is a labor shortage in the construction market. So even if they could build the homes for a reasonable price and people were buying them, there aren’t enough bodies to do the work of building the homes. 300,000 job openings in the construction market and they can’t fill them, that’s a big problem. I think part of that is people don’t really go into trades anymore. I think people are starting to get back into trades now that AI is becoming a thing and college is not as popular as it used to be, but I don’t think we’ve gotten there yet. And it’s just there’s not enough labor to fulfill the demand that we currently have. So how are we going to fill and build on 300,000 more lots with the problems that we’re seeing? The

Kathy:
Labor was there. The

James:
Labor was there. It left

Kathy:
In great fear. It

James:
Was there.

Kathy:
Why can’t we just give a lot of work permits to people who are willing to work? This is dirty, hard work. I mean, we just had, like I said, I’m here in my rental. We’re fixing up this house. It was rented for six years. There’s a lot of things that need to be done. And I look at these guys working so hard that you’re not going to find some student who wants to go do dig holes. They’re not going to do that. So we need to make a more friendly environment for the people willing to do that kind of work. But political stuff here, I digress. I

James:
Hear you.

Henry:
I don’t know if I’m buying that there’s no bodies to work though, especially in the new construction space. I know in the Pacific Northwest, a lot of companies have laid off 50 to 75% of their staff in the new construction space. There’s
Not maybe for labor, but project managers, superintendents, they are struggling for work right now in the new construction space because there was a lot of FOMO going on in 2021, 22, 23, where it was like this war for dirt. Everyone was trying to get it, everyone was trying to get it. We all overpaid a little bit. And now the problem with development is it takes 12, 24, sometimes longer, 36 months. You have such a longer opening window and you’re exposed to so much more market changes that either you hit it right or you hit it wrong. And right now if you’re selling today, you’re hitting it wrong. And there’s a lot of money bleeding out. One thing I will say for all these homeowners that owned dirt, if you’re listening right now, you missed the market. Your dirt is no longer worth what you think.
A lot of these lots are for sale because they are way overpriced and people have not came back to reality that their dirt is not worth gold anymore. And sellers are not being flexible. And it’s like, well, sorry to tell you, dirt is worth 40% less in Seattle than it was two years ago.

James:
Yeah. I mean, dirt’s going cheaper because it’s harder to sell because builders can’t make a pencil. That’s just supply and demand. And James, you can say what you want to say, buddy. You ain’t got to agree with it. You ain’t got to buy it, but the article’s from the National Association of Home Builders. So they seem to think there’s a problem and they’re the ones that are doing it every day. They’re saying the National Association of Home Builders estimates that the residential construction sector will need to add roughly 740,000 workers per year to keep up pace with the current industry’s growth. That to me says there’s a problem and there’s not enough bodies. And you can argue about it all day, but jobs are taking longer. Homes are taking longer to build. They’re sitting on the market longer and they’re not selling once they’re done.
All of that is hurting the pockets of the developers. And if the developers aren’t building, we’re going to continue to see a shortage. The shortage gap may even grow larger if the trend continues. And so 300,000 lots means absolutely nothing if people can’t afford to build on it, can’t find people who want to do the work to build on it and can’t find buyers to buy the product once it’s done. Yeah.

Henry:
And I think it just depends on the market’s in, right? In this article, 25.3% of all for sale listings are in rural markets. That’s where you’re slap cheap, build for 150 bucks a foot or less markets, right?

Kathy:
Yeah. You can still build affordably in those markets, very affordably, but where are the jobs? That’s the question. Where are the jobs where people need to be able to afford to live?

Henry:
And I think that’s why it’s so important for people to isolate where they are. Because the West Coast is a different story than the South. The South is a different story than the Northeast. And I could tell you on the West Coast, new construction, no one wants dirt. And if no one wants dirt, they don’t need building permits and they don’t need bodies because they just don’t need the staff. Most builders that I know, it’s funny, I was sitting on a plane ride with one the other day. I got on the plane and he also moved to Scottsdale. And so we do the same commute and he was going once a month. He’s like, “Yeah, no, everything’s humming. I go once a month.” And he’s like, “You go every week.” I’m like, “Well, yeah, I got this filming thing going on, so I got to go every week.” And now I’m like, “Oh, you still going once a month?” He’s like, “No, I’m going every week because I got to get through my lots and I laid off 80% of my staff.” There is a pullback right now on the West Coast for smaller builders that expanded out to get bigger.
They’re all shrinking back because they don’t enjoy it. And that’s where a lot of people are getting laid off. And again, it’s not the labor. Labor we need. Your straight labor needs, we need that. It’s the middle tier. And the middle tier is also who buys the houses, the people making 100, $150,000 a year as superintendents and project managers. They’re hurting for work right now. There is not a whole lot of job openings. And there’s a lot of construction that is stopping. And because it’s stopping, it’s causing a problem because the people don’t have the work to do it. And we’re going to go through this transition right now, but the dirt that I’ve been seeing is at least 35% cheaper than it was 12 months ago. Wow. A lot of opportunity because a lot of builders have just frozen because they are sitting on way too much expensive inventory.

Kathy:
I feel it. But

Henry:
We definitely need the workers though because that, my demo costs and everything are still way through the roof. I can’t get that down. It’s that the entry level employee is definitely harder to find. Yeah.

Kathy:
I mean, even if the lot price is down 35%, on the opposite side, how much of an increase has it been on material costs, labor costs, all the other costs? Is that 35% discount on land going to make a difference? And I don’t know, I could tell you with a lot that we have that we would love to build on, and I looked at all opportunities, I looked at manufactured housing, and it was not much cheaper to do manufactured housing. In fact, once we ran the numbers, once we built it and tried to sell it as a spec home, it would be as if we got the land for free. All the costs just cancel out the land. So we’d rather just sit on it. And we’re trying to sell the lot, but no one wants it.

Henry:
Yeah, because when you have rural lots, there’s a lot of money has to go into a rural lot. You got to run your utilities. Oh yeah. You got to get that thing buildable. That’s the cost. It’s like that’s why sometimes you can get a lot for free and you still can’t even make it

Kathy:
Pencil. It’s not free. No, especially if it is raw land like that. Yeah, you’ve got so many development costs.

Henry:
No, but right now, if you can pick up, I know Henry, you do a lot of this where you flip a house and put a lot in your pocket. Those are really good deals to buy right now because the land is not worth a whole lot. And your land’s not worth anything today, but in five, 10 years, it’s going to be worth some money down the road. And so if you could put some lots in your pocket, you’re doing okay. All right, well, lots of dirt for sale right now. A lot of opportunity there. We’re going to talk about where you can find your opportunities after our break. We are back on On the Market. And Kathy, you brought in an article that talks about off-market listings and more regulation coming through on those. Boo.

Kathy:
I know. I know. Well, this is an interesting article from Housing Wire. It is called The Off MLS Debate Moves to Washington and Agents Need a Clear Script. So guys, I don’t know if this is going to affect you with your off-market deals. This is more about brokerages and kind of keeping it in-house and is this allowed? House panels are going to be reviewing private listing networks while Compass cites 4.6% gains and other studies show off MLS homes sell for less. So what that means is basically lawmakers are reviewing these private listing networks, specifically Compass, where they will do a pre-sale or a coming soon with a property, and then they just kind of circulate it within their own network. At least this is what’s being stated. And they say it works great because these coming soons and new listings are exciting for their current list, and they think that they’re getting higher prices for their sellers by doing it that way.
But some legislators don’t think that’s the case, specifically Elizabeth Warren wants to see if this is actually hurting the seller because they’re not going on the full MLS right away where every agent can see it and every agent could show it and anybody could see what’s for sale. Then Zillow did a report saying that actually they studied more than 15 million sales and Zillow found that if you keep your property off the MLS, they would actually sell for less, 1.3% less, which is a combined $1.36 billion lost to the seller. So I think this is a situation where politicians are getting involved in private market issues and maybe just wanting to make sure that the sellers really know what’s happening, that there’s enough disclosure that they understand, hey, this isn’t going out on the full MLS. This is just going within our own brokerage to our own agents so we could get the double listing, we can get the buyer and seller fees.
As long as that’s disclosed, I feel like a seller should be able to do whatever they want. But I think that’s what this is about is just making sure that disclosure is there. What are your thoughts? I

James:
Have thoughts, but I’m not an agent. So I’m curious to know what James thinks.

Henry:
Oh, I have lots of thoughts on this. The first thing I think is politicians aren’t salespeople and they don’t understand sales, packaging or marketing whatsoever. And their opinions are irrelevant to me on this because they don’t know what they’re talking about. And I would love to go debate them and I would totally come into a hearing and I will pull properties. And these properties that I just bought are all on market. And these on-market deals I bought for less than what they trade for off-market.

Kathy:
Really? I mean, that’s what the article’s trying to say is, “Hey, we’re actually helping the seller.” I

Henry:
Could go through my last 20 purchases and 18 of them are on market. Because the thing about off-market, when people are packaging and selling it, they’re selling exclusivity. It’s this rare thing. You can’t find it anywhere else. And that’s where you get investor friendly. It’s like when you go down to the public auction. When you go buy at the public auction for a foreclosure, you don’t really get a good deal. A lot of times they’re paying 80 to 85 cents on the dollar down at that auction because why? There’s a frenzy. There’s competition. People get caught up in it. That’s why I won’t physically allow myself to go to auctions because I can’t control myself.Because I was overpaying because I just get so caught up in the moment. And so I disagree with this across the board because you should be able to market and package these things whatever which way you want because it’s your property.
And it really comes down to, as a seller, you should be working with a person that you trust. And if you trust in that person that’s a professional, then they’re going to market it the right way. Some properties will sell for much higher when a buyer is getting exclusively, especially luxury real estate. For sure,

Kathy:
Luxury.

Henry:
I’m looking at reselling my flip in Newport Beach right now because I want to lock in a price. And once it goes to market, everyone can look at it and they feel like it’s less special. And so I just don’t agree with what they’re saying. I do agree with everything should be heavily disclosed. Sellers need to know. Yeah,

Kathy:
Because I don’t think Elizabeth Warren is very worried about the luxury. I think she’s worried about typical home seller going to an agent and not knowing that their property hasn’t been marketed widely.

Henry:
It’s not even luxury though. There was a deal that was just sent to me yesterday, or it was three days ago, and they’re like, “Hey, you can buy this house for 360 grand.” I’m like, “Oh, that sounds like a good price.” Then I pull up the MLS and there’s two homes that were listed for 400 that sold for 325 and 335 on market. And not only that, these homes were in better condition than this off-market deal. And I’m like, “I’m not going to overpay on the as-is value and someone bought that deal anyways.” Whereas that same person could have gone on market and just bought themself a much simpler project. And so the exclusivity does work. Everything should always be disclosed and people need to have all the information to make the right decision. I think the seller should have that information, but then give the seller.
It’s America. Let them do what they want with their property. Yeah,

James:
That’s the point I was going to make, James, is I hear what you’re saying, and you’re right. These politicians don’t understand the marketing that’s involved. These are marketing and sales tactics that most agents are using to try to get the house sold for a good price. Remember, they get paid a commission. The more they sell it for, the more money they make. So they’re incentivized to sell it for more, but they also want to make sure it gets sold. So I don’t think that the government should step in and regulate how the houses are marketed and sold unless it tampers with some sort of fair housing. In other words, unless we are purposefully leaving out a specific group of people by using these marketing tactics. That I don’t agree with, but they should be able to market it how they want to. But I also agree that it needs to be disclosed property.
Me as the consumer, me as the person who has a home to sell, if I go to my agent, I want to know what’s happening from a marketing perspective. Why are you marketing my property this way? If it’s all done in good faith, meaning you’re trying to get the home sold as quickly as possible for as much money as possible, you should have no problem having a disclosure out there telling us what you’re doing so that at least we have an understanding. Because at the end of the day, it’s my home. So I think it should be disclosed. I’m fine with that, but I don’t think it needs to be regulated. I don’t think you should get to tell people how to market and sell their properties unless it’s some sort of discrimination.

Kathy:
Agreed. Politicians

Henry:
Need to keep their hands out of the cookie jar and work with people rather than tell them what to do. Well, we’re going to take a quick break right now, but when we come back, we’re going to talk about why maybe it’s a good time to sell off market because home sales have plummeted according to this news article. We’ll be right back. All right, we are back with On the Market and we’re going to jump right into an article. This is a NAR report, and I think it is in the scare tactics a little bit. NAR reports that July existing home sales are down 1.7%. And I’m seeing a lot of articles talking about home sales are plummeting. The National Association of Realtors say existing home sales seasonally adjusted to an annual rate of 4.06 million homes in July down 1.7% from June, but up 0.7% compared to a year ago.
In addition, the median home sale price came in at 434,100, which is up 2% on a year-over-year average. And this is marking the 37th consecutive month of year-over-year price increase. So one thing that I’ve been looking at as a flipper as a home seller is what’s the velocity? What’s going on with the market? And some markets are telling different stories. I really think it’s important that people don’t always grab the headlines and go, “Okay, the wheels are coming off.” Because if you really break down this article when I was looking at it, I’m like, “This is kind of bogus. Nothing is falling apart here.” What it’s talking about is home sale pricing’s up year over year. And that home sales are up year over year in July. It’s just down from June.

James:
There’s

Henry:
Just more inventory to pick from right now, which buyers should have in general. And it really also comes down to where are you buying and where are you selling? Because each region tells a different story. A month over month in the Northeast was up 2%. So if you’re selling in the Northeast, you’re actually selling fine right now. You’re seeing an increase. The West Coast is actually unchanged. It’s flat, which I am experiencing. Homes are selling, they’re just taking longer to sell, but they are selling. And if you’re in the Midwest, you’re down 2%, and the South is actually the dragger. It’s at the worst at negative 3.1%. And so when you’re looking at this down 1.7%, it really depends on the region that you’re in. And if you’re an investor in the Northeast, I wouldn’t worry about too much of that noise because your velocity’s a lot better than the South.
And with the West Coast, again, we’re flat. And so we’re consistent, but we got to get through this inventory at this point. And if you’re maybe in the South, maybe building a little bit more protection in your underwriting because sales are coming down, which also could bring down pricing just a little bit and drag it. I mean, Henry, are you filling that down South in your market?

James:
We are seeing longer days on market. The typical first time home buyer home is the class of home that is taking the longest to sell. It’s the class of home that there’s more inventory of. So buyers can be picky and choosy and ask for things. We are also seeing that luxury homes are doing the opposite. They are much shorter days on market. They’re selling faster. I think part of that is because we have a lot of high income earners here in this area with the job market that we have. And so that price point of home, there is less inventory of it on the market, but there’s more demand because of the high income earners. So those properties go quicker. And then the third trend that we’re seeing is that in the first time home buyer marketplace, that traditional three bed, two bath, 1500 to 2000 square foot home, what I’m seeing is unrenovated homes in that space are selling much faster than flipped homes in that space because people would much rather pay less to get the unrenovated home right now because they can afford it more so than the pretty flipped home.
So those are the trends that I’m seeing in this part of the South. And all of that is positive to me because all of that still involves people transacting. It’s our job as business owners to figure out what people are buying in those transactions and then position ourselves to be able to provide that inventory to the market that’s actually buying. How

Henry:
Much are you showing? Because one of the biggest things I track is showing activity. I mean, I do care about pennies, I care about actives, but it’s how many bodies are coming through the house? Compared to if you’re selling one of those cleaned up, more affordable houses versus your flips that are more dialed in, what’s your difference in body count coming through those houses?

James:
James, you would be blown away. Blown away. When I stick an unrenovated as-is home, yes, we clean it up. Yes, we fix the things that need to be fixed. It’s a safe home to live in. Everything in the house works. It’s just not pristine because it’s all not brand new finishes. It’s

Henry:
Financing ready. It’s

James:
Financing ready. When I stick those on the market, James, the last one we put on the market, it was on the market for 48 hours. We had over 20 showings. We had five cash offers, 48 hours. Now, compare that to the last renovated property that I put on the market here. It was probably on the market for just under 30 days, probably for about three weeks. We maybe got nine to 10 showings total, and we did end up with a full price offer, but it took almost a month, which is normal. That was normal traction. I wasn’t upset with that at all. That’s about what I expected. What I didn’t expect was the amount of showings we got on the unrenovated property in just 48 hours. That was crazy. Well,

Henry:
And that’s what tells the different story. There’s velocity in every price point. And I always take these articles with a grain of salt. All right, sales are down, but where are the sales down? I mean, Kathy, you work with a lot of buyers out there. How is your buyer activity? Oh my

Kathy:
Gosh. We had one of the best months and years of so many investors wanting to buy new homes. And I think it’s because I’ve said this before, but because builders are having a hard time selling, they are discounting, but they don’t really want a discount price. So they would rather give you other incentives. And one of the better incentives for us is to buy down our rate so that we can really increase cash flow. If we can get the rate down to 3%, and in some cases, they’re paying 40, 50 grand to do that rather than discount the house by that amount. And the properties cashflow beautifully on. They’re not 30-year fixed rate loans, but they’re fixed for 10 years. So a lot of opportunity. I think people are seeing that. I think there’s confidence that there is so much big money, institutional money coming into housing.
It’s kind of mind-blowing that as we’ve said before, you’ve got Japanese companies buying US builders. You’ve got Berkshire Hathaway investing in builders, and yet it’s really difficult to sell new homes. So what are they seeing? What are they seeing? Is this just a moment in time? Is this just a little glitch in the market where next year we’re going to be having a different problem? Where once again, people are clamoring over homes. I don’t know. They’re looking at data that I think a lot of people in today’s market may not be seeing. We know that there’s a shortage of homes, but it doesn’t seem to be the right homes because we see that there’s a glut of homes, but they’re just not attainable for a lot of people. So perhaps these builders are looking at, hey, wage growth is going to catch up with this.
Interest rates are going to come down. Something. They’re seeing something to come into a business that has numbers like this. So I believe that, again, this is what I think some of these institutional firms are looking at, that in a few years things are going to be different again. There’s going to be this desperate need for housing. And perhaps, like I said, wage growth has caught up or interest rates have come down or something’s changed so that it becomes more affordable. Or

Henry:
Housing pricing goes way down.

Kathy:
There’s that. There’s that.

Henry:
But I think one thing that’s interesting, what this article talks about is what you were saying, Kathy, you guys are busy because you’re seeing the opportunity because a lot of investors are just passing right now. Investors and second home buyers were at 14% of the purchases, which is down 20% year over year. Wow.

James:
So

Henry:
Investor activity’s down 20% of the sales. And what that does mean is the ones that are still buying are buying good deals.

James:
Supply

Henry:
And demand, right? When the demand drops, you can get the better pricing. And so I think you’re doing more deals because there’s actually deals out there to be done. Yeah. And

Kathy:
Then again, from our perspective, it is a buy and hold situation. So we’re looking at areas where, hey, this is a new house. This is going to last for many years. It’s going to have very low capital expenditures most likely. Everything’s new. And this is going to really do me well in 10 to 20 years because we see the growth happening. So it’s just a different mindset. You looking at the properties differently if you’re not planning on selling it tomorrow. If you’re planning on holding it and hoping that in 10 years that the property’s going to still be in great condition in a great neighborhood where there’s jobs, it’s just again, a different perspective.

Henry:
You know what? I do love buying stuff when people are freaked out. Oh, me too.

Kathy:
That

James:
Is my jam.

Kathy:
That is our jam.

Henry:
And Henry, that’s why you can buy these kind of clean ones, right? Like you had to pay way too much for them before. Now you can actually get the discount to make a margin on them. So when it feels a little scary, there’s a lot of opportunities out there. That is for sure. All right, that’s it for today. Kathy, Henry, it’s always good hanging out with you. I always love debating too.

Kathy:
Always fun. Love seeing you guys.

James:
Had a great time. Thanks for having us, James.

Henry:
Well, make sure you guys follow the On the Market podcast for all your real estate updates and subscribe to our YouTube channel for more real estate news analysis and inventory strategy. I’m James Dainard with the On the Market Podcast, and we will see you guys next time.