Corporate earnings reports for the past quarter are winding down. But there are a couple of important industries that still haven't reported, including home builders. Construction firm Toll Brothers will report Q4 earnings Tuesday, followed by Lennar and KB Home next week.

The latest Census Bureau data on housing construction is not great. The most recent numbers are from August, thanks to the government shutdown. Building permits were down 11% from the year before and housing starts were down 6%.

Builders started this year with a good deal of optimism, said Ali Wolf, chief economist with the housing data firm, Zonda. Even with elevated interest rates there seemed to be a lot of people who wanted to buy homes.

“So going into 2025 builders were like, ‘OK, the year's at least gonna be good. Let's ramp up on new construction,’” she said.

But come the spring selling season and those buyers just didn’t turn up. 

“Builders found that they had a lot of standing inventory without consumers to buy those homes. So they have no incentive to build more homes if they couldn't sell the homes that they already had available,” Wolf said.

Sales were slowed in part by relatively high mortgage rates, she said. Those could tick down in the coming year.

But the cost of building supplies may not, because President Donald Trump has imposed tariffs on many of them, said Sage Policy Group CEO Anirban Basu — including softwood lumber, copper, steel, and aluminum.

Those import taxes have raised prices for the structure itself, and the appliances that go in it. Basu said Trump’s immigration crackdown is playing a role too.

“If you look at the majority of our roofers in many communities, drywall, hangers, painters, so on and so forth, they're immigrants,” he said.

And so, the number of potential workers in the home building industry right now, “it's much smaller than the amount that we would need in order to be running at maximum efficiency,” said Macrina Wilkins, senior research analyst with the Associated General Contractors of America.

She said home building is also highly sensitive to borrowing costs. The Federal Reserve is expected to cut interest rates at its December meeting, but persistent inflation means those cuts may not continue.

When you add it all up for home builders?

“2026 has the potential to be better than 2025, but it does depend on whether or not financing costs ease,” Wilkins said.

Demand for new housing will still be there, she said. The question is whether builders will be able to meet it at a price buyers can afford.