The Farnsworth Group, a customer research firm serving the building materials industry, describes the residential building and home improvement market as fundamentally sound but operationally strained. Core demand drivers, including household formation, an aging housing stock, long-term homeownership aspirations, and high home equity, remain intact. Near-term activity, however, is constrained by affordability pressures, elevated interest rates, labor and material challenges, and consumer uncertainty. As a result, the market is moving forward at a flat, measured pace rather than accelerating or collapsing.
Supply-side conditions reflect imbalance. New home inventory reached 7.4 months’ supply in August, exceeding the healthy six-month level and prompting builders to slow single-family starts. Existing home inventory remains tight at 4.4 months’ supply, keeping home values high and limiting mobility. This imbalance has supported multifamily construction, as affordability and inventory constraints push more households toward renting. At the same time, the U.S. housing stock continues to age, particularly in the Northeast, increasing demand for repair, maintenance, and remodeling.
On the demand side, interest in housing and home improvement persists but is constrained by financial realities. Mortgage rates remain elevated, affordability is near generational lows, and incomes have not fully kept pace with inflation and borrowing costs. Homeowner psychology is a defining factor, with weakened confidence, lower home-buying sentiment than during the COVID-19 pandemic, and softer project intent. These conditions are leading to cancellations, delayed decisions, smaller project scopes and heightened price sensitivity.
Contractors are experiencing similar pressures. While many report healthy backlogs and confidence in winning work, they also face rising competition, labor challenges, material cost pressures, and a higher rate of postponed or canceled jobs. The result is a volatile market where opportunity exists but requires greater adaptability across the supply chain.
Several headwinds continue to weigh on growth, led by affordability constraints, consumer uncertainty, limited disposable income, persistent labor shortages, and intensifying competition among contractors. At the same time, tailwinds support longer-term stability, including intact housing demand, aging homes, high equity levels, and resilient contractor confidence. Forecasts point to gradual improvement, with 2026 expected to resemble 2025, marked by incremental growth driven more by cost increases than unit gains.
For manufacturers and suppliers, the environment calls for precision, transparency, and reliability. Clear value messaging, dependable availability, strong service support, and alignment with contractor workflows are critical. In a market defined by uncertainty rather than decline, suppliers that reduce risk and reinforce trust are positioned to emerge stronger as demand gradually reaccelerates.
