America's 'New Housing Crisis': January Home Sales Plunge 8.4% — But Homebuilder Stocks Are Surging to 52-Week Highs

At the heart of the crisis is a phenomenon the industry has dubbed "golden handcuffs." Roughly half of all U.S. homeowners currently hold mortgages with rates below 4% — a legacy of the pandemic-era refinancing boom when the 30-year fixed briefly dipped under 3% in 2021. With the current 30-year fixed mortgage rate at 6.09% as of February 12, 2026, these homeowners face a punishing financial calculus: selling means surrendering a historically cheap mortgage and taking on a new loan at nearly double the cost.

The result is a market that, as Yun put it bluntly, is one where "Americans are stuck." Inventory stood at 1.22 million homes at the end of January — up 3.4% year over year but still translating to just a 3.7-month supply, well below the 6-month threshold that defines a balanced market. Homes are lingering longer, with the average days on market stretching to 46 in January versus 41 a year ago. And critically, renters — the very cohort that could inject new demand — are "not participating in housing wealth," according to Yun.

Regionally, the pain was widespread. Sales fell hardest in the South and West, traditionally the most active markets for both new and existing homes. The only price tier showing year-over-year gains was the $1 million-and-above segment, underscoring how the affordability squeeze is most acute at the entry level. Sales of homes priced below $250,000 declined the most, locking out exactly the buyers the market most needs.

If existing homeowners won't sell, someone has to build. That simple logic is driving the strongest start to the year for homebuilder stocks in a decade, according to Barron's. The SPDR S&P Homebuilders ETF (XHB) is trading at $122.02, up 2.4% on the day and 11.1% above its 50-day moving average. The sector's momentum is broad-based: D.R. Horton ($168.35, P/E 15.3x), Lennar ($123.64, P/E 15.5x), KB Home ($66.99, P/E 10.9x), and Toll Brothers ($167.64, P/E 12.4x) are all trading at or near 52-week highs.

The investment thesis is straightforward. With 3 to 4 million additional homes needed to close the national housing shortage — a figure cited by Motley Fool analysts — and existing homeowners effectively removing supply from the market, new construction is the only viable release valve. The Trump Administration has proposed constructing 1 million entry-level homes, while Fannie Mae and Freddie Mac are expected to purchase $200 billion in mortgage-backed securities to help reduce borrowing costs. These policy tailwinds, combined with the structural supply deficit, are creating what Zacks analysts describe as a "perfect storm" for builders.

What's particularly compelling is that this rally isn't built on hope alone. D.R. Horton reported fiscal Q1 2026 revenue of $6.89 billion with net income of $594.8 million and EPS of $2.03. While that represents a sequential decline from the seasonally strong Q4 ($9.68 billion revenue, $3.04 EPS), the company's gross margin held at 23.2% — a sign that pricing power remains intact even as the builder strategically uses incentives to move inventory. Lennar posted Q4 2025 revenue of $9.37 billion, maintaining its position as the second-largest U.S. builder by volume.

One of the more confounding dynamics in today's housing market is that prices continue to climb despite collapsing transaction volumes. The median existing home price of $396,800 in January marked the highest January reading on record, extending a trend that has seen typical homeowners accumulate roughly $130,500 in housing wealth since January 2020, according to NAR data.

Yun offered a nuanced view of the affordability picture. NAR's Housing Affordability Index shows that housing is actually the most affordable it has been since March 2022, thanks to wage gains outpacing home price growth and mortgage rates sitting below year-ago levels. The 30-year fixed rate has drifted lower from 6.23% in late November to 6.09% this week, a modest but meaningful improvement. The Federal Reserve has cut the fed funds rate from 4.33% in August 2025 to 3.64% in January 2026 — a cumulative 69 basis points of easing — but that relief has been slow to transmit to mortgage markets, where the 10-year Treasury yield (currently 4.18%) remains the more relevant benchmark.

First-time buyers represented 31% of January sales, up from 28% a year ago — a small but encouraging sign that younger households are finding pathways into homeownership despite the headwinds. But the broader picture remains grim: for every first-time buyer who closes, there are many more locked out by the combination of elevated prices, high borrowing costs, and scarce inventory at the entry level.

The housing crisis isn't confined to the residential market. Commercial mortgage-backed securities (CMBS) delinquencies rose 17 basis points in January to 7.47%, up from 6.56% a year ago, according to Trepp. The January increase added a net $1.6 billion in delinquent loans — $5.4 billion in newly delinquent balances, partially offset by $2.6 billion in cured loans and $1.1 billion in payoffs.

The office sector remains the epicenter of distress. Office CMBS delinquencies surged 103 basis points in a single month to 12.34%, an all-time high on Trepp's index dating back to 2000, surpassing the previous record of 11.6% set in October. January's spike was driven by two massive New York City properties: Worldwide Plaza ($940 million) and One New York Plaza ($835 million). Combined, these two loans alone accounted for a disproportionate share of the monthly deterioration.

But Trepp's head of applied research, Stephen Buschbom, cautioned against panic. The vast majority of delinquent office loans are maturity defaults — borrowers who are current on payments but cannot refinance at today's higher rates. Many are injecting marginal equity to buy extensions rather than walking away. "The underwriting and the securitization design are much more disciplined, much lower risk" than during the 2008 crisis, Buschbom noted. He projects office CMBS delinquencies will peak somewhere between 12% and 13% this year, particularly as Class A trophy buildings see rising occupancy — especially in cities benefiting from AI-driven employment growth — and as office-to-residential conversions begin to chip away at the distress.

Analyst estimates paint a cautiously optimistic picture for the homebuilding sector. For D.R. Horton's fiscal year 2028 (ending September), consensus estimates project quarterly EPS ramping from $3.02 in Q1 to $5.10 by Q4, implying full-year earnings power north of $16 per share — a significant acceleration from the $11.04 trailing twelve-month EPS the stock currently commands. Lennar's trajectory is similar, with analysts modeling EPS growth from $2.25 in its fiscal Q1 2028 to $4.71 by Q4.

These estimates embed an assumption that mortgage rates will decline gradually through 2026 and 2027, stimulating enough demand to keep builders' order books full without unleashing a flood of existing home supply that would undercut new construction pricing. The "Goldilocks" scenario for builders is one where rates drift into the high-5% range — low enough to improve affordability but still high enough to keep the golden handcuffs firmly clasped on existing homeowners sitting on sub-4% mortgages.

The risk, of course, is that the Fed's rate-cutting cycle stalls or that long-end Treasury yields refuse to cooperate. The 10-year yield has been stubbornly range-bound between 4.16% and 4.29% throughout February, providing little relief to mortgage borrowers. If inflation proves stickier than expected — the CPI index rose from 323.3 in August 2025 to 326.6 in January 2026 — the Fed may slow its easing pace, keeping mortgage rates elevated and deepening the very crisis that builders are positioned to benefit from. For investors, the homebuilder trade is ultimately a bet that America's housing shortage is structural, not cyclical — and that no amount of rate volatility can alter the fundamental math of a nation that simply hasn't built enough homes.