The rapid appreciation of homes over the last few years, and the even more rapid rise in mortgage rates resulting from the Fed’s efforts to control inflation, have crushed affordability for aspiring homebuyers.

Builders have slowed construction as they work to manage inventory levels in a softer demand environment.

RSM Real Estate Senior Analyst Crystal Sunbury explains in a recent note that the cooling in demand means the industry needs to find ways to navigate the challenge of affordability.

According to Crystal:

• Builders are adjusting pricing and incentives, such as rate buy downs, to continue selling inventory and help offset affordability constraints for buyers.
• To help mitigate some of the supply-chain challenges and stabilize build times, companies are adding suppliers and providing lead time on future needs.
• Builders are expanding into build-to-rent options to cater to Americans who desire affordable housing.
• Increasing compensation and benefits is an important step in attracting labor, along with proactive approaches like partnering with trade high schools and technical colleges to recruit future employees.