Real estate investors have had a wild few years. From record-low mortgage rates in 2020 to skyrocketing home prices in 2022, it’s been a rollercoaster. Now, another shift is happening—builder confidence just hit its lowest level in seven months. According to the NAHB/Wells Fargo Housing Market Index, builder sentiment dropped to 39 in March. For context, a reading below 50 means more builders see conditions as bad rather than good. This is happening while mortgage rates hover around 6.6%, making it more expensive for buyers to afford homes. For investors, this signals both risk and opportunity. Here’s what’s going on, why it matters, and how to make smart moves in this changing market.

Why Is Builder Confidence Dropping?

A few big factors are dragging builder sentiment down:

• Rising Material Costs: The recent 25% tariff on imported steel and aluminum is making construction even more expensive. Builders estimate that new tariff-related costs add about $9,200 per home.

• High Mortgage Rates: The average 30-year fixed mortgage rate is around 6.6%, keeping many buyers on the sidelines.

• Slower Demand: More builders are offering price cuts and incentives to move inventory, which is never a good sign for market confidence.

With these pressures mounting, many builders are pulling back on new projects, which could tighten housing supply down the line.

What This Means for Real Estate Investors

If you’re investing in real estate—whether through physical properties or real estate stocks—this shift impacts you in a few ways.

1. New Construction Homes Might Be a Bargain

When builders lose confidence, they start offering discounts to offload inventory. In March, 29% of builders cut prices to attract buyers, and 59% offered incentives (things like free upgrades or rate buy-downs).

For investors, this creates an opportunity to negotiate better deals on new construction homes, especially in areas where demand remains strong.

2. Mortgage Rates Could Keep Demand Soft

With rates staying high, fewer buyers are jumping into the market. That could mean slower appreciation for home values—but it also keeps rental demand strong since many would-be buyers are stuck renting instead.

For investors holding rental properties, this is actually a positive. Higher rates keep homeownership out of reach for many, which means more long-term tenants and potentially higher rents.

3. Homebuilders Stocks Might Take a Hit

If confidence among builders continues to fall, publicly traded homebuilding companies could see their stock prices drop. We’re already seeing slowing sales projections from major builders.

If you’re investing in real estate through REITs or homebuilder stocks, it’s worth paying attention to how companies are adjusting to these conditions. Some may become undervalued opportunities, while others could struggle.

Smart Strategies for Investors Right Now

So, how do you make money in a market like this? Here are a few ways to play it smart:

1. Look for New Construction Deals

If you’re in the market for an investment property, check out new developments where builders are offering discounts. Some may be desperate to move units, which could lead to below-market purchases.

2. Hold Strong Rental Properties

If mortgage rates stay high, demand for rentals should remain steady. Ensure your rental properties are in locations with strong job growth and low vacancy rates to minimize risk.

3. Keep an Eye on REITs and Homebuilder Stocks

Some publicly traded homebuilders could become undervalued if sentiment keeps dropping. This could be an opportunity to buy quality stocks at a discount.

4. Automate Your Investing Strategy

Markets shift fast. The best investors stay ahead by using data-driven investing rather than emotions. This is where automated investment strategies come into play—they help you adapt to market changes without constantly monitoring every move.

Final Thoughts

The housing market is cooling, but that doesn’t mean it’s time to panic. Smart investors know that market downturns create opportunities—if you know where to look.

Want to stay ahead of real estate trends and adjust your investments automatically? Surmount helps investors automate their portfolios so they’re always positioned for market shifts.

Disclaimer: The information presented is for educational purposes only and not an offer or solicitation for any specific investments. Investments involve risk and are not guaranteed. Consult with a financial adviser before making any investment decisions. Past performance does not guarantee future results.