As we look back at 2025, we can probably all agree that things have been shaken up in Washington D.C. Whatever your take, shaking things up is better appreciated in politics than in economics. On that front, the year has been marked by falling consumer confidence with elevated food and energy prices, the DOGE cuts, the historically long government shutdown, tariff increases and a significantly stepped-up immigration enforcement. On top of all this, labor markets have softened and existing home sales remain low, stuck at levels not seen since the Great Recession.

With all this bad news we should be pleasantly surprised that permits for new single-family housing have declined only 15% since the start of the year. And that decline may turn around in 2026, given that the new home market did pretty well this past year. New home sales have been running at a slightly below 700k sales annually, which is lower than 2021 and 2022, but still represents a better pace than anytime between 2008 and 2018. While prices for those sold homes have softened, median prices remain above $400k, 30% higher than pre-pandemic, despite higher interest rates. Builders are still deep in the black, although profits have softened.

This resiliency stems from the fact that U.S. household finances remain strong, with record high disposable income (inflation-adjusted), record high net worth and relatively low debt-to-income ratios. That strength is driving demand for housing, which is running up against tight markets for existing homes. This has allowed new home markets to push through the uncertainty and high interest rates, and despite insecurity surrounding the broader economy, 2025 is shaping up nicely. Although the nation started the year with a contracting economy, the second quarter posted nearly 4% real growth and preliminary forecasts suggest the third quarter could be similarly strong once government data is released. Inflation is holding steady in the high 2% range, and the Federal Reserve is allowing interest rates to drift lower even as money supply growth increases, making credit easier to obtain.

As Beacon Economics often notes, there is a wide disparity between popular narratives about the economy and economic reality, shown in the objective data we study on a daily basis. The U.S. economy is much stronger than the prevailing narratives suggest. In fact, it is too strong—overheated by asset bubbles in the equity markets and record deficit spending by the Federal government in the midst of a full employment economy.

The overheating is evident in the ongoing expansion of the U.S. trade deficit, now at 3.5% of GDP, the widest since the Great Recession and in the record inflows of portfolio investment capital into the U.S. economy. These are clear signs of overspending and are hardly surprising given that the more than $2 trillion in borrowing this year tallies to a $16,500 subsidy for the average American household. The official savings rate for U.S. households is 5%, but when government borrowing is included, that evaporates to -5%. With that being said, the U.S. economy will continue to expand, and housing demand will keep growing until the government subsidies come to an end. But what could cause that to occur? Economists have been warning about U.S. government borrowing for decades and it’s come to nothing. This time, however, is different.

The current wave of public borrowing has been financed largely by foreign portfolio capital pouring into the nation, chasing returns from the AI- and Crypto-driven finance bubble. This linkage implies that when the bubble finally pops the United States will have to start self-funding its Federal deficit and that can only occur though a hefty increase in interest rates, which will make the $38 trillion in existing debt that much more expensive to carry. This could quickly turn into a vicious cycle where the government is forced to rapidly close deficits by raising taxes and cutting spending, causing a recession. An even more likely scenario is one where the Federal Reserve engages in additional quantitative easing (printing money), which will cause another inflationary surge.

Add it all up and the new home market should continue performing reasonably well, until it doesn’t. Builders should move forward cautiously, appreciating that the current expansion is entering its last stage of growth before reality catches up. All economic cycles weigh heavily on housing markets, and this one will be no exception. Those who are able to withstand the cycle will be the ones with high profits on the other side of the downturn.

Christopher Thornberg, PhD, is an economist and Founding Partner of Beacon Economics. Learn more at www.BeaconEcon.com.

This column is featured in our Builder and Developer December issue, Read More here

For decades, the formula for selling homes was straightforward with safety, square footage and access to top-rated schools at the top of the list. These priorities formed the foundation of American homebuying until now. Today’s homebuyers, regardless of age and stage of life, are reshaping the definition of what makes a desirable home and community with wellbeing at the forefront.

Once seen as more of a luxury, wellbeing is now arguably one of the most important drivers behind housing decisions, with the America at Home Study reporting that wellness is in fact the number one purchase motivator for homebuyers today.

Homebuyers are seeking a lifestyle that supports all dimensions of wellbeing, from the physical, to the mental and emotional, as well as environmental. There are several aspects of wellbeing that have become more than a ‘want’ when searching for a home to buy, they have become expectations, and include:

Access to Open Space and the Outdoors
The pandemic did not create the need for green space, but it certainly magnified it. Proximity to parks, trails and even thoughtfully landscaped community spaces is a critical decision factor for many. Buyers want to step outside their front door and be able to engage with nature, whether for morning walks, evening runs or moments of quiet reflection. For example, The Nature Reserve at Rancho Mission Viejo boasts 21,000 acres of protected open space. According to a recent bi-annual resident survey from The Ranch, 64% of respondents said access to nature and open space was very important to them.

Community Connection
A sometimes overlooked but important aspect of wellbeing is social connectedness at home. Today’s homebuyers are craving genuine connection and a sense of belonging. Community events, festive traditions, interactive classes, resident-led clubs and a myriad of other experiences help residents bond over shared interests, discover common ground and build lasting friendships. For example, The Ranch’s community farms provide an opportunity for residents of all ages and stages of life to reconnect with the land while creating connection with each other and the environment. Resident-led clubs, programs and activities through RanchLife, The Ranch’s dedicated lifestyle experience, also contributes to a unique social environment, which promotes unity and personal growth and development.

Intergenerational Living
Intergenerational living has become an increasingly important expectation for today’s homebuyers, as families and individuals seek deeper connections, shared purpose and a stronger sense of togetherness across generations. Communities like The Ranch are responding to this need by interspersing Gavilán 55+ active-adult neighborhoods amongst the other all-age neighborhoods. Grown children and aging parents can live just down the road from one another. And thoughtful intergenerational amenities such as Boulder Pond and Playground allow grandparents to stroll while grandchildren play, and neighbors of all ages can connect.

Abundance of Amenities
From pools and parks to fitness centers and clubhouses, amenities are essential features that support wellbeing, enhance lifestyles and encourage people to gather and get to know their neighbors, make friends and create community. Homebuyers are focused on obtaining the utmost quality of life in their daily environments, making access to thoughtful amenities essential for those looking to set down roots. The same resident survey from The Ranch noted 75% of respondents said amenities were very important to them, and one of the community attributes they value most.

In today’s housing market, it’s clear that the demand for wellbeing-centered features is not a passing trend, it’s a defining shift. Buyers of all ages, from millennials and first-time homeowners to active adults 55+, are seeking more than just a place to live. They want communities that support a healthier way of living and a more balanced lifestyle. Whether it’s access to open space, thoughtfully designed amenities or the ability to live with or close to other family members, these features are viewed as essential.

Developers and master-planners who recognize and respond to this growing shift towards wellness are setting themselves apart from competition. More importantly, they are helping to build stronger and more connected communities. Wellness matters. It’s not just about square footage or curb appeal anymore, it’s about creating environments where people can thrive across all stages of wellness.

Stephanie Walker is the Vice President of Marketing for Rancho Mission Viejo. She may be reached at www.ranchomissionviejo.com.

Photo credit: Rancho Mission Viejo

This article appears in our September issue of Builder and Developer.

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