Survival Mode: How AI is Keeping Builders Afloat as Buyers Hesitate

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News Flash

Builders Turn to AI When Times Get Tough

Residential builders are betting big on artificial intelligence and PropTech startups as elevated interest rates and rising material costs squeeze margins tighter than ever.

The integrations span everything from site selection to cost estimation. AI-powered platforms can now analyze zoning laws, environmental regulations, and demographic trends to identify optimal development locations with unprecedented speed.

Cost estimation is getting a major upgrade too. AI algorithms analyze historical project data, current market prices, and economic indicators to generate precise budget forecasts. They can even optimize material procurement by identifying cost-effective suppliers and predicting availability.

Customer engagement is also going digital. AI platforms analyze buyer preferences and browsing history to recommend personalized floor plans and finishes. Chatbots handle initial inquiries and provide virtual tours 24/7, while AI assists in lead qualification.

Builders need every efficiency they can get right now. AI isn't just a nice-to-have anymore—it's becoming essential for staying competitive.

Buyers Hit the Brakes as Uncertainty Peaks

Meanwhile, on the buyer side, things are getting shakier. A new Bank of America survey shows 60% of consumers are uncertain about buying a home right now—the highest level since 2023.

The culprit? Mortgage rates hovering in that painful 6-7% range. The average 30-year fixed rate hit 6.74% in late July—a slight drop from 6.75% the week prior, but still a significant affordability barrier.

The market is feeling the freeze. U.S. existing home sales dropped to a nine-month low in June. Pending sales falling through hit record levels for June as well.

Here's the twist: inventory is actually up nearly 30% year-over-year. At current sales pace, it would take 4.7 months to clear existing inventory, up from 4.0 months last year.

But more choices aren't translating to more sales. High prices, elevated rates, and economic jitters continue keeping buyers on the sidelines.

The takeaway? While builders innovate to stay afloat, buyers remain spooked. Until rates stabilize or prices adjust, expect this standoff to continue.

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More You Should Know

• Mortgage Rates Tick Down: The average 30-year fixed-rate mortgage saw a slight decrease to 6.74%, as reported by Freddie Mac, driven by market optimism regarding potential Federal Reserve rate cuts later in 2025. [Source]

• Home Sales Hit Nine-Month Low: U.S. existing home sales in June fell to a nine-month low of 3.93 million units, a 2.7% month-over-month decrease, as elevated mortgage rates and economic uncertainty continue to deter buyers despite a 15.0% year-over-year increase in inventory. [Source]

• Housing Supply Climbs, Sales Dip: Despite rising new home inventory to levels unseen since 2007, U.S. single-family home sales in June underperformed expectations at a 716,000 unit annual rate, as high mortgage rates and construction costs continued to suppress buyer demand. [Source]

• Homebuilding Slows Amid High Costs: U.S. single-family housing starts and building permits fell to their lowest levels in over a year this June, as elevated borrowing costs and persistent supply-chain issues continue to compel builders to scale back new projects, further exacerbating housing inventory shortages. [Source]

• Regency Bolsters Retail Presence: Regency Centers acquired a five-property, $357 million suburban retail portfolio, bolstering its footprint in college towns and suburban areas, reflecting strong investor confidence in grocery-anchored shopping centers amidst increasing e-commerce competition. [Source]

• Office REIT Goes Private: MCME Carell, an Elliott Investment affiliate, is acquiring City Office REIT for $1.1 billion, reflecting ongoing challenges in the office sector such as remote work and increased financing costs. [Source]

• Construction Headwinds Reshape Development: Facing labor shortages, escalating material costs, and tighter credit, developers are prioritizing larger, more secure projects over speculative builds, while supply chain disruptions and tariff uncertainties continue to prolong schedules and increase cost risks. [Source]

• NAR Antitrust Suit Dismissed: A federal court in Wichita Falls, Texas, has dismissed an antitrust and contract lawsuit against the National Association of Realtors (NAR), the Texas Association of Realtors, and the Wichita Falls Association of Realtors, which alleged that MLS membership rules unlawfully restricted access. [Source]

• Brokerages Settle Commission Lawsuit: Four brokerages, including Higher Tech Realty and eXp World Holdings, have agreed to a $44.05 million settlement in a nationwide class action alleging MLS commission-inflation conspiracies, which will also implement practice changes banning mandatory seller-paid buyer-broker commissions for sales on MLSs from October 2019 to July 22, 2025. [Source]

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