At Zonda’s Builder 100 Leadership event, I discussed 10 issues the industry faces that are developing but not fully appreciated by the market. Below is a synopsis of each issue and its associated impact on the industry.

Stagflation
Stagflation is hard on housing, but even harder for building products because of its effect on margins. Flashback to January 1973: The consensus expectation was for 2 million housing starts, with some forecasters predicting years of housing undersupply. One year later, amid a stagflation recession, volumes dropped considerably in what some coined “the lumber recession.” Interestingly, builder margins improved while supplier margins declined.
Rating: Headwind

Owner Occupancy Fraud
Address matching reveals that some small investors checked the owner-occupant box on their mortgage application, but never actually moved in. During the financial crisis, these deceptive borrowers were 75% more likely to default when home values softened. There aren’t forced sales today due to elevated home equity, but perhaps there could be strategic sales as some owners pull chips off the table and list their Airbnb units.
Rating: Headwind

Decay in Official Data
The former head of the Bureau of Labor Statistics (BLS) recently said, “Our surveys are dying; they’re decaying.” This is especially true of the underlying data behind many housing decisions, including income growth, household formation, population estimates, inflation, and the labor market, which are skewed due to collection problems. Stop saying income and household growth is substantial, because issues with the data could skew the reality.
Rating: Headwind

Inflation Changes
How we measure inflation will likely change within five years, as the problems mentioned above will require the BLS and the Census to modernize their data collection methods. Part of this fix will be to incorporate non-survey-based alternative data, which is probably the right move, but has knock-on consequences of its own. Preliminary tests measuring prices with this data result in very different conclusions on price trends, which could cause volatility.
Rating: Tailwind

Postponed Moves
Homeowners younger than 50 are deferring moves but are generally less satisfied with their homes. The issue could be related to how hard it was for shoppers to find homes amid the housing shortage, followed by the lock-in effect. That means many homeowners are poorly matched with their homes. They could find homes that better suit their needs when the market stabilizes.
Rating: Tailwind

Shifting the Lock-in Effect
Evidence suggests the spring slowdown in home buyer traffic has more to do with economic uncertainty than high mortgage rates. This means it’s harder to drive traffic using mortgage rate buydowns. The good news? We’ve seen this before, and if you believe things will stabilize, consumers could get a boost.
Rating: Cautious Tailwind

Online Building Products
Online buying was already gaining a share of building product sales, at around 8% to 9% to start 2025. Pro contractors are shopping more online and directly from the manufacturer. In a volatile price/cost environment, there is a compelling case that the channels with the best data on costs and substitutions (Home Depot, Amazon, etc.) might find a way to offer lower prices earlier than competitors.
Rating: Tailwind

Product Pricing Power Shifting
During the 2021-22 supply chain shortages, building product companies had extremely forgiving circumstances where many companies launched new products, built new brands, and repriced existing products. Now, Zonda data reveals significant underlying differences in brand power among pro contractors, with about 5% of brands commanding real pricing power among pro contractors, another 18% neutral, and the other 77% being left to fight for market share with promotions. As these brands face cost increases amid slowing industry demand, the profitability of building product companies will diverge.
Rating: Headwind

First-Time Formative Experiences
The challenges first-time home buyers faced from 2020 to 2025 may permanently shift how they purchase homes, including how much money they spend and which features they prioritize. Evidence from other industries suggests that similar shifts are permanent, even decades long. Some builders will find the best way to meet their needs.
Rating: Tailwind

Life Expectancy
Long-run housing projections (2035+) look quite different with even modest improvements in life expectancy. Future advances in medicine are hard to predict, but it seems reasonable that “some improvement” is more plausible than “zero improvement.” Some forecasts predict that 16 million older people will age out of the market, but even modest extensions in lifespan (say, five years) drive several million additional housing units.
Rating: Tailwind