housing affordability

Rising Construction Costs: Are Builders Winning the Fight in 2025? By Mark Levinson · Published November 5, 2025 Builders are fighting back to reduce hard costs—or at least that’s what we tell each other. With a “back-to-basics” mindset, we rationalize options, build faster, and discount harder. We find ourselves inviting our “vendor partners” to share in the pain, or at least in our reduced margins. Across the United States, homebuilders are feeling the squeeze. Rising material, labor, and financing costs are colliding with buyers who have reached affordability limits after years of underbuilding and persistently high mortgage rates. The result is a market where profit margins are thinner, project timelines are longer, and managing risk has become just as essential as managing construction. While some builders have adapted with scale efficiencies, others—particularly regional and mid-size operators—are struggling to sustain production levels. The broader consequence is a persistent undersupply of new housing units, along with continued upward pressure on prices, rents, and land values. Financing: The Tightest Squeeze The most immediate pressure point remains financing. Mortgage rates hovering near 6.5%–7.5% have dampened buyer demand, but the cost of capital for builders has risen even faster. Short-term construction loans—usually floating-rate—are adjusting upward,