The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Sebastian Pellejero

NEW YORK, June 24 (Reuters Breakingviews) - America’s housing market could use a new blueprint. Sales of older homes have hit a 16-year low, despite rising inventory and a dip in fresh construction. While sales of new homes have hit their highest level in three years, neither homebuilders nursing declining share prices nor home buyers struggling with affordability are benefiting. The industry may have to shift where it’s building, and how.

New home inventory has surged 20% from last year to roughly 4.6 months of supply, the highest figure since 2016, according to Commerce Department data. Similarly, inventories of existing homes have climbed every month since December, the National Association of Realtors reckons. Yet this hasn’t boosted affordability: home prices have surged in every state since 2019, while inflation-adjusted median incomes have flattened in recent years. Nearly all age groups in Bank of America’s analysis fall below the average homeownership rate from 1994 to 2024.

This points to a major mismatch. Homebuilders chased pandemic-era population spikes in sunnier states like Florida and Texas, where new building permits neared or exceeded their pre-financial-crisis highs, according to the U.S. Census Bureau. This boom is now fading. Net year-over-year population gains in Florida fell by 79% between 2022 and 2024, and in Texas by 58%, according to Barclays. More hostile immigration enforcement under the Trump administration threatens growth from new arrivals to the country.

Builders are feeling the squeeze. An S&P index that tracks U.S. homebuilder shares is down 4% over the past year, versus a 9% gain for the benchmark S&P 500 Index .SPX. Lennar LEN.N exemplifies the predicament. Despite higher deliveries, the second-largest U.S. homebuilder saw earnings plunge 50% year-over-year in its latest quarter after slashing prices to clear inventory.

Worse, reorienting to greener pastures is easier said than done. High-demand metro areas like New York boast high incomes, but also steep zoning restrictions that constrain new supply. Meanwhile, signs of incipient economic weakness make affordability even more paramount.

That leaves homebuilders to focus on what they can control: the cost of the structures they build. Lennar and its kin already talk of efficiency drives. More innovative measures may be needed. Wall panels constructed offsite, for instance, reduce framing time by 30% and can bolster profitability by $2,000 per home, according to UBS. Texas-based distributor Builders FirstSource BLDR.N, which derives 24% of sales from its pre-fabricated building products, has seen shares rise an astonishing 452% over five years. Even 3D-printed homes have seen a trial run in the Lone Star State. It’s time for the U.S. dream home to break new ground.

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CONTEXT NEWS

The seasonally adjusted annual rate of existing U.S. home sales hit around 4 million in May, the slowest pace for the month since 2009, the National Association of Realtors said on June 23.

(Editing by Jonathan Guilford; Production by Pranav Kiran)

((For previous columns by the author, Reuters customers can click on PELLEJERO/ Sebastian.Pellejero@thomsonreuters.com))