Two housing stories caught my eye, and I think they connect:

First, homebuilder confidence fell to 35 in June. Anything below 50 means more builders feel negative than positive about the market. Builder confidence has now been under 40 for 14 straight months, which is the longest slump since 2012.

That matters because builders are not just guessing--they build when the math works. And right now, the math is tough.

Mortgage rates are keeping buyers cautious. Building costs are still high. Land, labor, financing, permits, materials, and insurance all add up.

So even though we keep hearing that America needs more housing, builders are looking at the market and asking a simple question:  “Can buyers actually afford what we have to build?” That may explain why 35% of builders are cutting prices.

Now add the second story: a “starter home” now costs $1 million in over 200 U.S. cities. That count has tripled since 2020. Twenty-six states now have at least one city where the typical starter home is at or above $1 million. California alone has 105 of them.

That is a big problem.

A starter home used to be the first rung on the ladder. It was not perfect, but it got a buyer into ownership. In many markets, that first rung is disappearing.

This is where the builder story and starter-home story meet. We need more supply, but builders cannot always build affordably. Land, labor, materials, financing, and regulation often push them toward higher-priced homes because that is where the margin is.

So buyers need affordable homes. Builders need profitable projects. Lenders need borrowers to qualify. And the monthly payment still has to work.

For investors, I think the lesson is simple: do not assume new construction will automatically solve affordability. Do not assume strong demand makes every property a deal. And don’t assume rents or appreciation will bail out weak numbers.

This market is stuck between need and affordability. People need places to live, but they also need payments they can handle. That is where the opportunity is. And also where the danger is.

As always, it’s the numbers--they have to tell the truth before you buy or build.

What are you seeing in your local market?  Does the 'affordable starter home' category still exist?