Consumer Demand for Homes Now Outpaces Purchasing Power, Says CEO

July 8, 2025

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Updated on July 11, 2025

July 8, 2025 — The U.S. housing market is grappling with a growing affordability crisis as consumer demand for homes continues to exceed purchasing power, according to David O’Reilly, CEO of Howard Hughes Holdings.

In a recent interview on CNBC’s Money Movers on July 7, 2025, O’Reilly highlighted the economic uncertainty fueling a pause in homebuying, with rising costs and stagnant wages creating a significant barrier for prospective buyers.

O’Reilly emphasized that the gap between home prices and consumer affordability has widened, with many potential buyers unable to keep up with escalating costs.

“The consumer demand for homes has outpaced their wallet and their ability to afford those homes,” O’Reilly told Money Movers hosts Carl Quintanilla and Leslie Picker.

He attributed this trend to broader economic uncertainties, including persistent inflation and high interest rates, which have made homeownership increasingly elusive for many Americans.

This sentiment aligns with broader market trends.

According to a Federal Reserve Bank of New York survey released on July 7, 2025, consumer confidence in the economy has slumped, with growing concerns over inflation, unemployment, and stock market volatility.

These factors are compounding the challenges for homebuyers, particularly first-time purchasers facing high mortgage rates and elevated home prices.

The housing market has been under pressure from rising mortgage rates, which have climbed significantly in recent years.

In an October 2022 interview with CNN Business, O’Reilly noted that mortgage rates reaching 7% were not deterring older buyers who could sell existing homes at a premium, particularly in high-cost areas like New York and California.

However, for younger or first-time buyers, the combination of high rates and home prices creates a formidable barrier.

Data from the National Association of Realtors supports this view, estimating a housing shortage of approximately 5 million homes before the pandemic, a gap that persists and continues to drive prices upward.

O’Reilly highlighted that in markets where Howard Hughes Holdings operates, such as Phoenix, Las Vegas, and Houston, demand remains robust, particularly among retirees relocating from coastal cities for lower taxes and larger homes.

In a December 2024 interview on CNBC’s Closing Bell Overtime, O’Reilly reiterated that home prices are unlikely to decline significantly until mortgage rates decrease, underscoring the persistent affordability challenge.

“Until mortgage rates come down, we won’t see prices come down,” he stated, pointing to the interplay between borrowing costs and market dynamics.

Howard Hughes Holdings Navigates Market Challenges

Howard Hughes Holdings, a major real estate developer based in The Woodlands, Texas, has been a key player in the housing market, focusing on master-planned communities in high-demand regions.

Despite the affordability crisis, O’Reilly expressed optimism about the company’s resilience.

In a 2024 interview on CNBC’s The Exchange, he described the year as a “golden age of homebuilding,” driven by sustained demand in key markets.

However, the company has faced its own challenges.

In 2019, Howard Hughes explored strategic alternatives, including a potential sale, as reported by CNBC’s David Faber.

More recently, billionaire investor Bill Ackman’s Pershing Square Capital Management, which owns approximately 46.9% of Howard Hughes, has proposed significant investments to transform the company into a diversified holding company, akin to a “modern-day Berkshire Hathaway.”

In May 2025, Pershing Square announced a $900 million deal to purchase 9 million newly issued shares at $100 each, a 48% premium over the stock’s closing price at the time.

Ackman’s vision includes expanding Howard Hughes’ portfolio beyond real estate, potentially into sectors like insurance, though analysts have expressed skepticism about the value this creates for existing shareholders.

JPMorgan noted that the deal structure may not allow common shareholders to fully realize the proposed value, while Piper Sandler highlighted concerns over a 1.5% annual management fee to Pershing Square.

Challenges Amid Economic Turbulence

The housing market’s challenges are unfolding against a backdrop of broader economic turbulence.

On July 7, 2025, CNBC reported that seven additional countries, including Cambodia and Thailand, received tariff letters from President Donald Trump, signaling ongoing trade tensions that could further impact construction costs and housing affordability.

Additionally, investor Ray Dalio warned of a “more than 50% chance of trauma” if the U.S. budget deficit is not addressed, adding to economic uncertainty.

Meanwhile, Zillow’s chief economist, Orphe Divounguy, noted increased competition in the housing market from existing homeowners selling their properties, further complicating the landscape for new home builders.

O’Reilly remains cautiously optimistic about a “soft landing” for the housing market in regions with strong demand, such as the Southwest, where migration trends continue to drive growth.

However, he acknowledged the broader challenges facing the industry, particularly in commercial real estate, where tighter lending standards and changing work patterns have created additional hurdles.

As the housing market navigates these turbulent times, O’Reilly’s insights underscore a critical reality: while demand for homes remains strong, affordability constraints are forcing many buyers to pause, reshaping the dynamics of the U.S. housing landscape.

For Howard Hughes Holdings, strategic moves like Ackman’s investment may provide a path forward, but the broader market’s challenges will require careful navigation.

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