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  • Housing Prices Are Finally Slowing. Affordability Still Isn’t Fixed.

Housing Prices Are Finally Slowing. Affordability Still Isn’t Fixed.

May 31, 2026

Home prices are no longer running away from buyers. That sounds like good news, and in one narrow sense, it is.

The S&P Cotality Case-Shiller National Home Price Index rose just 0.7% in the 12 months through March, down from 0.8% in February.

For the 10th straight month, inflation outpaced national home-price appreciation. But this is not a clean affordability breakthrough.

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Slower Price Growth Is Not The Same As Affordable Housing

The housing market is starting to give buyers a little more negotiating room.

National home prices rose just 0.7% from a year earlier in March. That is barely positive, and it marks another month where home prices failed to keep pace with inflation. On paper, that looks like progress. If wages and inflation are moving faster than home prices, affordability should slowly improve.

But the key word is slowly.

The problem is that the affordability damage from the last few years was massive. Home prices surged during the pandemic-era housing boom, mortgage rates later jumped, and buyers were left with the worst combination: elevated prices and expensive financing.

A 0.7% price increase does not undo that.

It simply means the pressure is easing at the margin. Buyers are no longer chasing double-digit home-price appreciation. Sellers no longer have unlimited leverage. But monthly payments remain the real barrier, and those payments are still too high for many households.

That is why this housing market feels stuck. Prices are slowing, but not enough to bring buyers rushing back.

Mortgage Rates Are Still The Gatekeeper

The mortgage-rate story remains the biggest driver of housing demand.

The 30-year fixed rate dipped below 6% in late February, giving the market a brief shot of optimism. But by the end of March, it had rebounded to roughly 6.4%, re-intensifying the affordability squeeze for buyers.

That move matters.

Housing demand is extremely sensitive around this level. Below 6%, buyers start to re-engage. Around 6.5%, the payment math gets uncomfortable again. This is the range where a small move in rates can decide whether a buyer makes an offer or stays on the sidelines.

That is why the March price data does not signal a broad recovery.

A true recovery needs lower rates that last long enough to rebuild confidence. Buyers need stability. Sellers need confidence that demand is real. Lenders need volume. Agents need transactions.

Right now, the market has rate volatility instead.

That keeps housing frozen. Buyers wait for better terms. Sellers resist larger price cuts. Transactions stay soft. Price growth slows, but affordability does not reset fast enough.

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The Regional Split Is Getting Sharper

The national number hides a very uneven market.

Chicago posted the strongest annual gain among the 20 major cities, with prices up 6.1% in March. New York rose 4%, and Cleveland gained 3%. Seattle was at the other end, with prices down 2.5%.

That tells you housing is no longer one national trade.

Some Midwest and Northeast markets are still supported by tight supply, better relative affordability, and steady demand. Other markets, especially areas that saw huge pandemic-era price gains or rising inventory, are under more pressure.

This matters for investors because housing exposure needs to be more selective now.

A builder in a tight, affordable market has a very different setup than a builder exposed to overheated coastal or Sunbelt markets with rising inventory. A home-improvement retailer tied to repair demand has a different profile than a mortgage lender that needs transaction volume. A title insurer, broker, or real-estate platform needs sales activity to come back. A building-products company needs construction and renovation budgets to hold up.

The housing trade is no longer “rates down, buy everything.”

It is now about geography, affordability, balance sheets, and business model durability.

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Builders Need Discipline, Not Just Demand

Builder stocks are not uninvestable here. But the bar is higher.

The best builders can manage land costs, use incentives carefully, focus on stronger markets, and protect margins. They can offer mortgage-rate buydowns or closing-cost support without giving away the whole profit pool. They can lean into communities where demand still exists and pull back where affordability is broken.

The weaker builders have less room.

If material costs keep rising and buyers keep pushing back, margin pressure builds. If mortgage rates stay high, order growth stays uneven. If affordability does not improve, incentives become more expensive.

That is the risk in this market.

Builders do not need a housing boom to perform. But they do need enough demand to absorb rising costs. March’s home-price data says pricing power is fading. The materials backdrop says costs are still a problem.

That combination rewards the best operators and punishes the rest.

Homeowners May Stay Put Longer

The existing-home market also remains frozen by the lock-in effect.

Millions of homeowners still have mortgage rates well below current market levels. They have little incentive to sell, buy another home, and reset into a much higher monthly payment. That keeps transaction volume weak, even if home prices stop rising.

This creates a strange setup.

Low turnover hurts agents, mortgage lenders, title companies, and platforms tied to home sales. But it can support repair and maintenance demand. If people cannot move, they renovate, repair, upgrade, and make the current home work.

That does not mean every home-improvement stock is an automatic buy. Big-ticket discretionary projects can still get delayed. But essential repair, maintenance, smaller upgrades, and professional contractor demand should prove more durable than pure transaction activity.

That is where investors should focus.

Actionable Stuff

Do Not Confuse Cooling With Cheap

Home prices are slowing, but affordability is still poor because mortgage rates remain high.

Watch The 6% Mortgage Line

Below 6%, buyers come back. Around 6.5%, demand gets hit again. That range still controls the market.

Be Selective With Builders

The best operators can manage incentives and costs. The weaker ones face margin pressure.

Favor Repair And Maintenance Demand

If homeowners stay put, they still need to fix, maintain, and upgrade what they already own.

Avoid Pure Transaction Dependence

Mortgage lenders, brokers, and title names need sales volume. The March data does not prove that volume is back.

Top Picks

D.R. Horton (NYSE: DHI)

D.R. Horton remains one of the cleaner builder picks because scale matters in a tougher housing market.

When affordability is stretched, buyers become more price-sensitive. D.R. Horton’s focus on entry-level and move-up homes gives it better exposure to the parts of the market where demand still exists, especially if it can use incentives and rate buydowns strategically.

The company also has the scale to manage land, labor, and materials more efficiently than smaller competitors. That matters when copper, lumber, diesel, and other inputs are pressuring construction costs.

This is not a blind bet on a housing boom. It is a bet that the largest builders keep taking share while smaller operators struggle with cost volatility and financing pressure.

What to watch: Orders, cancellation rates, gross margins, incentives, and whether affordability-focused communities keep outperforming.

Lennar (NYSE: LEN)

Lennar fits this market because it has the size, operating discipline, and flexibility to navigate uneven demand.

The company can use incentives where needed, manage inventory, and focus on faster-turning homes. That is important when buyers are sensitive to monthly payments and sellers in the existing-home market are still locked in by low mortgage rates.

Lennar also benefits from the broader shift toward new homes when existing-home supply remains constrained. Even if national home-price growth is slowing, buyers who cannot find the right existing home may still turn to builders that can offer financing support and more predictable inventory.

The risk is margin pressure. If material costs keep rising and buyers demand more concessions, profits get squeezed. But among builders, Lennar has the scale to handle that better than most.

What to watch: Delivery pace, gross margin, incentive use, community count, and management commentary on buyer traffic.

Home Depot (NYSE: HD)

Home Depot remains one of the best housing-adjacent names when transaction volume is weak.

If home sales are slow, move-related spending stays under pressure. But homeowners still repair roofs, replace appliances, fix plumbing, maintain yards, and upgrade rooms over time. The longer people stay in their homes, the more the repair-and-maintenance cycle matters.

That is why Home Depot fits the current housing setup. It does not need a full housing recovery to stay relevant. It needs homeowners and contractors to keep spending on necessary projects.

Big-ticket discretionary renovation is still a risk, especially if consumers feel squeezed. But Home Depot’s Pro exposure, scale, and essential product mix give it a sturdier setup than pure housing transaction plays.

What to watch: Comparable sales, Pro demand, big-ticket transactions, repair-and-maintenance trends, and margin management.

Builders FirstSource (NYSE: BLDR)

Builders FirstSource is a higher-beta way to play the housing supply chain.

The company provides building products, components, and services to homebuilders, which makes it directly tied to construction activity. That gives it more upside if new-home construction holds up, but also more risk if builders pull back because of rising material costs or weaker buyer demand.

The reason it belongs here is that scale and supply-chain capability matter more when costs are volatile. Builders need partners that can help manage complexity, labor shortages, and materials availability. BLDR sits close to that problem.

This is not the safest housing pick, but it is one of the more direct ways to own builder activity without buying a homebuilder outright.

What to watch: New construction demand, value-added product growth, margins, lumber price volatility, and builder order trends.

Bottom Line

The Big Takeaway

Home-price growth is slowing, but housing affordability is still broken.

What It Means

Prices are no longer surging, but mortgage rates, material costs, and weak transaction volume are keeping the market stuck. Buyers have a little more leverage, but not enough relief.

How To Play It

Focus on scale, discipline, and repair demand. Own the builders and housing-adjacent companies that can manage costs and survive low turnover. Avoid the weakest transaction-dependent plays until lower mortgage rates actually bring buyers back.

That’s it for today’s edition—thanks for reading! Reply to this email with any feedback or let me know which macro trends or markets you’d like me to cover next.

Best Regards,
—Noah Zelvis
Macro Notes