DALLAS, September 16 — The story begins with a number that keeps moving in the wrong direction. Just last week, mortgage rates crossed the 7% mark, and for the people who build houses across North Texas, that single figure has reshaped the math on nearly every deal they try to close. Matt Walls, president of the Dallas Builders Association and owner of Winston Custom Homes, said his corner of the market has been sluggish.
Mortgage rates are keeping many prospective buyers on the sidelines and discouraging existing homeowners from giving up loans secured when rates were considerably lower. Rates reversed course as the war in Iran contributed to higher oil prices, renewed inflation concerns, and broader market uncertainty.
What unfolded nationally follows the same pattern. Robert Dietz, chief economist for the National Association of Home Builders, said the single-family home building market is on track for a second consecutive annual decline in 2026, with new home sales down more than 4% on a year-to-date basis. New home prices hit a five-year low last month nationally, with sales softening over the summer as well.
D-FW recently ranked eighth in the nation for share of homebuilders cutting prices on new construction.
The arithmetic of a rate tick
Walls said there is almost nothing motivating somebody to go out and do something, noting that even a small tick in either direction could mean the difference between qualifying or not. For every 1% the interest rate goes up, that’s $240 a month on a $400,000 house; on a $500,000 house, that’s $300 a month, and so on. At the higher end of the market, Walls said the effect is somewhat different.
Many homeowners who might otherwise move into an $850,000 or $1 million home might be locked into mortgages carrying 3-4% rates or even lower, and rather than surrender that financing, they are increasingly choosing to remodel.
Costs that don’t come down
Mortgage rates aren’t the only things weighing on homebuilders. Labor shortages and tariffs continue to put pressure on pricing. Walls pointed to a National Association of Home Builders estimate from last year that tariffs could add roughly $10,900 to the cost of a new home through higher prices for metals, appliances, and other materials.
One notable exception is lumber. Walls said his lumber prices are the best they have been in years, although he said that was indicative of weak construction demand, with lumber companies just trying to get rid of their lumber and holding way too much.
Finding workers has been posing a more persistent challenge. Walls said a shortage of people in the skilled trades can add as much as two months to the construction schedule for a typical home; a missing plumber, electrician, or masonry helper can delay subsequent work, leaving a builder to absorb additional financing and carrying costs. Nationally, the construction industry is looking to expand the pipeline of skilled workers through initiatives such as the newly announced Alliance for America’s Skilled Trades, backed by Ford, Carhartt, and other major companies.
Home Builders Institute CEO Ed Brady said the shortage costs the U.S. economy more than $10.8 billion annually, delays home construction by nearly two months, and prevents about 19,000 homes from being built each year, according to a press release. Pressure extends beyond the skilled trades.
Walls said immigration enforcement has reduced the availability of some general laborers who haul construction debris, move materials, and assist specialized subcontractors. If you’ve got a chain of construction going on a schedule, you’re only as strong as your weakest link, he said. Walls said his longstanding relationships with subcontractors have insulated his company from the worst disruptions, but larger builders that rely on a much broader labor pool have felt a greater impact.
Cities and the cost of building
Municipal expenses are also complicating efforts to deliver more affordable homes. Although cities frequently discuss streamlining development to address the region’s housing needs, Walls said builders have seen few meaningful cost reductions. He said he doesn’t see where builders are getting any cost breaks from cities right now, and that it’s just been the opposite.
For builders, the combined effect is a market in which buyers need lower prices but nearly every stage of producing a home carries added expense. It’s a constant battle every day, Walls said.
What to watch next is whether mortgage rates retreat from that 7% threshold, and whether the national decline in single-family building extends into a third year. For now, the leverage buyers may be gaining in a more balanced market comes against a backdrop where the cost of producing a home keeps climbing.
