As the Federal Reserve adjusts to “mild data degradation” born of the six-week U.S. government shutdown, interruptions to data collection and reporting have caused official statistics on new-home construction and sales conditions to have gone unreported since late summer.
August figures were the last batch released by the U.S. Census Bureau, which typically reports changes in the pace of new-home starts, permits, completions and sales on a monthly basis.
The bureau announced this week that updated figures on new-home sales and construction would finally be published on Jan. 9 and Jan. 13, 2026. In the meantime, however, America’s largest homebuilders have filled the fourth-quarter new-home market data void with a stark warning.
In the absence of federal statistics, these financial disclosures from major builders provide a retrospective look at the health of the new-home market. The data suggests that while demand from homebuyers exists, it comes at a steep price to those contributing new inventory amid an affordable housing crisis in the U.S.
Fourth-quarter earnings reports from publicly traded Lennar Corp. and D.R. Horton indicate that the market for newly constructed homes is clinging to a life raft of heavy, margin-crushing incentives.
Their filings reveal marked revenue declines and substantial difficulties in moving standing inventory — and continued challenges for the new-home sales market heading into 2026.
Bloated inventory, rising debt
On a year-over-year basis, Lennar’s operating earnings declined by 47% in the fourth quarter, to $710 million from $1.5 billion a year ago. At the same time, Lennar’s share of homebuilding debt to total capital roughly doubled, from 7.5% to 15.7%.
Not only has Lennar’s debt risen and revenues fallen, but the report shows the company’s gross margin on home sales shrank to 17%, pocketing a net margin of about 9% — down from a gross sales margin of 22% and net margin of nearly 15% in the fourth quarter of last year.
Those thinning margins reflect the cost of keeping buyers at the table as Lennar’s backlog of unsold homes simultaneously expands and depreciates.
The company’s backlog of completed, unsold homes grew by nearly 20% over the year, to 13,936 from 11,633 — but the dollar value of that backlogged stock declined from $5.4 billion to $5.2 billion, a 3.7% drop.
Lennar reported that its combination of sales incentives, including mortgage rate buydowns and price cuts, averaged 14% of the sales price in the fourth quarter. This is above normal levels, which Stuart Miller, co-CEO of Lennar, stated typically hover between 5% and 6%, according to comments he made following the company’s first quarter earnings report in March.
To match the market’s decline, Lennar said it lowered its pace of new-home starts to an average of 3.7 per community in the fourth quarter, a decline of 19.5% in the pace of starts (4.6) per community a year ago.
However, Lennar does have an advantage: it has sale backlog of 13,936 homes.
More sales incentives next year
Fourth-quarter earnings reported by D.R. Horton, the nation’s largest homebuilder by volume, confirms the trend — and paints a picture of more aggressive discounting expected in 2026.
D.R. Horton reported that its gross margin on home sales fell to 21.8% in the fourth quarter, a 2.2% decline from a year ago. The company explicitly noted that it expects to “maintain an elevated level of incentives” and “may increase them further” depending on the market conditions and interest rates.
That strategy prioritizes volume over price. D.R. Horton’s average closing price for homes dropped 3% year over year to $369,600. All told, D.R. Horton’s revenue for the fourth quarter decreased 4% to $8.6 billion, though net sales increased 5%.
However, the value of its net sales orders decreased by 3% despite fourth-quarter sales order volumes remaining essentially flat, signaling that while buyers are still signing contracts, they are doing so at lower price points and with significant financial assistance from builders.
Worse yet, D.R. Horton has a smaller backlog of sold homes compared to Lennar, with only 10,785, which is almost 23% smaller than Lennar.
“New home demand is still being impacted by ongoing affordability constraints and cautious consumer sentiment, and we expect our sales incentives to remain elevated in fiscal 2026, the extent to which will depend on market conditions throughout the year,” David Auld, executive chairmen at D.R. Horton, wrote in a statement.
Erosion of bedrock data
Beyond the immediate pricing signals, the reliance on private data sources highlights a growing structural risk to market participants.
The government shutdown reignited fears regarding the long-term stability of core federal data sets. The market for new-home sales is unhealthy, indicators show. The lack of timely, sector-specific reports that industry participants rely on leaves business craving certainty operating in the dark.
There is further concern that recent disruptions are a symptom of a fraying statistical infrastructure, leaving the mortgage industry, homebuilders and investors questioning data integrity during a volatile period for asset pricing and strategizing for the year ahead.
Until the Census Bureau’s data releases in January, the market’s best compass may remain the thinning margins revealed by America’s construction giants.
