Builder Orders Fall 15% Amid Affordability Shifts
As mortgage rates impact market sentiment, builders are prioritizing profit margins over high-volume sales for new homes.
Updated on Oct. 29, 2026 in Residential
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Meritage Homes reported a 15% year-over-year decline in new home orders during the third quarter of 2026, citing persistent affordability challenges. Homebuyers across the country continue to face pressure as elevated mortgage rates impact sentiment and sales activity.
Why it matters
Rising mortgage rates and limited affordability are creating a difficult environment for prospective buyers, forcing major homebuilders to shift their strategies. By prioritizing profit margins over high-volume sales, developers like Meritage are managing through a period of cooling housing demand.
Meritage Homes saw a 15% year-over-year drop in orders for the third quarter of 2026, with an average absorption pace of 3.0 sales per store. The company maintained a 17.9% adjusted home closing gross margin despite the broader slowdown.
The players
Meritage Homes
A national homebuilder that constructs residential properties and manages home sales across 348 U.S. communities.
The details
Rather than aggressively pursuing high-volume growth, the builder focused on maintaining profitability by keeping margins stable. The company successfully converted nearly 190% of its existing backlog during the period, indicating that it prioritized completing existing projects over signing new contracts. While land investments hit $329 million, the firm relied on a disciplined financial structure, ending the quarter with $677 million in cash and a 18.9% net debt-to-capital ratio.
Timeline
Meritage Homes reported a 15% decline in third-quarter 2026 orders.
The firm returned $380 million to shareholders between Q1 and Q3 2026.
Management anticipates market conditions will remain unpredictable in future quarters.
Money Landscape
The homebuilding sector is currently navigating a period of tempered growth as borrowing costs remain elevated for most households. This result underscores the broader industry trend of prioritizing balance sheet strength over rapid expansion in a volatile interest rate environment.
If you are currently house hunting, expect to see builders maintaining firmer pricing rather than offering deep discounts to drive sales volume. Consult with a qualified financial professional to determine if waiting for potential market shifts aligns with your long-term housing budget and debt-to-income goals.
The takeaway
Builders are choosing to protect their profit margins, which may limit price flexibility for buyers in the near term. Keep a close eye on interest rate trends and discuss your purchase timeline with a qualified financial professional before committing to a new mortgage.
Further reading
For more on the current housing market, see our Residential section.
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