Navigating the Housing Market's Mixed Signals

In this podcast, Motley Fool contributors Tyler Crowe, Matt Frankel, and Jon Quast drill down into the confounding numbers in the housing market and some recent homebuilder earnings reports. They talk about:

• The good, the bad, and the outlook for homebuilder stocks.
• Starbucks' $1 billion restructuring plan.
• Stocks on their radar.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

A full transcript is below.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,068%* — a market-crushing outperformance compared to 190% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of September 29, 2025

This podcast was recorded on Sept. 25, 2025.

Tyler Crowe: A housing market deep dive with predictions and more. This is Motley Fool Money. Welcome to Motley Fool Money. I'm Tyler Crowe, and today, I'm going to be joined by longtime Fool contributors, John Cost and Matt Frankel. Now, I know we call it earnings season, but earning season never really ends because there's always somebody reporting something. We've actually had a couple Home Builders report recently. We're going to use this as a chance to dive into the industry, and we'll also wrap up today with stocks on our radar. But we're going to start the day with a fresh serving of news that Starbucks is planning a major restructuring. The company announced it will cut its North American store count by about 1%. Lay off about 900 employees, and it's all part of a $1 billion restructuring program to hopefully recharge a brand that perhaps people thought that the coffee had gone a little bit stale at Starbucks. Now, guys, I have conflicting thoughts about this. On the one side, not throwing good money after poor returns is always preferred. Hence, the store count reduction. But I don't think contraction was really on people's minds when they brought Brian Niccol in over from Chipotle to write the ship. Where do you land on this news and bonus to the question. What is your preferred coffee spot and preferred order?

Jon Quast: I think that Starbucks' optimist had hoped that we could keep all of these Starbucks stores and just simply get better efficiency out of them. I think that was the hope, bringing in Niccol that it would just be better operations for all the stores. Niccol is basically saying that some of these stores don't fit into the vision for the company going forward, so not all of them can be saved. They really want to promote this coffeehouse vibe where you come in, you stay awhile, and some of the stores he's saying are not conducive for that. They're going to go. This is a pricey move, $1 billion price tag. Much of it is going to happen this year, but there's going to be some ongoing expenses into next year. Not exactly what we had hoped for, but maybe a thing that has to happen, and they are saying we're going to get back to net unit growth next year. Maybe it all is a net positive in the end.

Matt Frankel: I'm generally a fan of this move as a Starbucks shareholder. Brian Niccol, he previously has already said that not all of Starbucks stores have a place in his new vision for Starbucks. For example, there are a bunch of stores that are drive through and pickup only and don't have anywhere to sit. That's not what he's going for with the back to Starbucks plan. It's also important to mention that, yes, it's contraction, but this will only reduce the North American store account by about 1%. It doesn't appear to be very targeted. I can tell you myself, there are about ten Starbucks within a 20-minute drive of where I'm standing right now, and there are a couple of them where I go in and I say to myself, How does this place make any money? I'm totally a fan of if there's no reasonable way to turn it around to get rid of a location. The company did say that its store account will resume growth in fiscal 2026, so this does seem temporary. To me, directing the company's resources at parts of the business that have the most potential is a good thing. Now, about my coffee order, admittedly, I was sipping Starbucks cold brew while I was prepping for the show, but I generally prefer smaller independent coffee shops. I was in New York City this weekend, and I went to a place called 787 Coffee and got a horchata latte that was delicious. Generally, an independent coffee person. And we still don't know what John's order.

Jon Quast: Man, y'all are way too fancy for me. What is black coffee at the gas station?

Tyler Crowe: Well, I mean, my preference is a double espresso, Black, so I'm not that far off from you. I don't know if that makes me a preferred or a hated customer at Starbucks. Decent ideas, some good, some bad here. Let's put some actual conviction behind these views here, guys. Based on Niccol's plan here, some restructuring, some of the vision for bringing back that third-place vibe that Starbucksreally wanted to achieve early on in its vision of the coffeehouse and may have strayed from that. Are you bullish on Starbucks the stock over the next three to five years after Niccol gets to implement this plan, or if not, are there alternative coffee or restaurant stocks that you think will do better than Starbucks?

Jon Quast: Well, I'm certainly not bearish on Starbucks. Starbucks, it's been a great brand for a long time. Then in Brian Niccol, you have a great operator. I think it's hard to be bearish with that combination. That said, it's hard to be overly bullish, as in market beating bullish for Starbucks right now just because of how many unknowns there are still with the business. There's still ongoing inflation with coffee prices. It's trying to make moves with its China business, but what exactly that's going to be, we still don't know. Maybe there's still some pricing adjustments that need to happen on the menu. That's one of the problems from previous management that Niccol might be still working out. It's hard to know for sure how much upside there is with Starbucks, but certainly I wouldn't bet against it.

Matt Frankel: I've bought Starbucks in the time since Niccol joined, generally on price drops and corrections. I'm generally bullish, I don't think he'll replicate his Japole returns. That wouldn't be a very realistic target. But I'll go on record here, predicting Starbucks will beat the market over the next five years. The earlier results are strong. Yes, same store sales declines are continued. They've moderated nicely, and all the numbers are trending in the right direction, so I'm very optimistic.

Tyler Crowe: Well, we got one person on record. See, we got a market beating stock in Starbucks here. Coming up next, we're going to make sense of the really mixed signals we're seeing in the housing market coming up after this ad.

For longtime listeners of Motley Fool Money, having Matt, John and myself is a relatively new experience, but I do want to give fair warning. We love talking housing. This isn't the first time and definitely won't be the last time. We're going to be dizing into housing and Home Builders. Home Builders tends to be a hidden gems esque type investment out there with a couple certainly in the Hidden Gems Universe, there's some Home Builders, so we get permission to do that since they're in the universe. I think it's fair to say that housing has been giving a lot of mixed signals lately. There's persistent reports about shortages of homes somewhere in the millions. But then we look at existing home sales that are at the same seasonally adjusted pace we saw in the depths of the Great Recession or in the early 1990s when there were less than 100 million fewer people in the United States. There's a lot of factors here. We got interest rates, we got employment, wage growth, home price inflation, etc. We really wanted to get into a deeper dive in this topic, and it gave us a really good time because we've had a couple of recent earnings reports from Lennar and KB Home really before earnings get to kick off. We get to focus on this a little bit more than we normally would. Matt, I want you to kick us off after reviewing KB and Lenar's most recent earnings report, what were some of the things that stood out to you in these earnings reports, and did they send any significant signals to you about the broader.

Matt Frankel: Well, first of all, I love these companies that have irregular fiscal years that keep us busy between earning season, for sure. Overall, the market environment still seems to favor new homes versus existing ones. John is going to talk about some of the incentives in a minute that are in the market. Although mortgage rates are still relatively high and are keeping things generally slow overall. But while existing home sales were virtually flat month over month and year over year in August, new home sales soared by 20% from July to August to a three year high. Much better than was expected. Now, the recent results are mixed. You mentioned KB and Lenar. KB just reported earnings and revenue. They exceeded the company's guidance, although home sales declined by 7% year over year. The company has been a great capital allocator. They bought back 11% of their outstanding shares this year. That's pretty remarkable. On the other hand, Lenar reported a 12% increase in new orders, although they're using more incentives, so their sales prices were down significantly.

Tyler Crowe: I want to give a little extra context on that new homes booming existing home sales stagnating. This is one of those. Today, I'm many years old when I found out according to the St. Louis Federal Reserve, homes owned without a mortgage recently hit the highest recording since they started keeping track of it back in the 1980s. That will mean that somebody's probably been in the residence, and for 30 plus years, have paid down that amortizing mortgage. Downsizing something that used to be more common for older homeowners, isn't really happening. And so we have all the owned homes out there, and that's really I guess you could say putting sand in the gears, excuse me, of the existing home market, and new homes have to fill the void. John how are the Home Builders doing when it comes to filling that void?

Jon Quastt: It's interesting. You do need to bring new buyers into the market. Shout out to KB Homes, seems to be doing pretty well in that regard. It said that half of its homebuyers are actually first time home buyers, so doing a good job there. But one of the things that these Home Builders are doing is incentivizing these purchases for a new home and this is, according to the National Association of Home Builders, more than 1/2 of builders cut their prices in August, and 2/3 offered incentives, and that incentive deal was actually the highest in five years. We're seeing an uptick there. Let me give you a real life example of what that could look like. This is from realtor.com, talking about a Dallas couple they got a DR Horton new home, and they got a lower rate at 3.9% versus 6.3% is what they should have gotten at the time. Their down payment was reduced 20,000-13,000. The final price of the home was reduced 370,000-332,000. Essentially, they were able to save $50,000 upfront and then hundreds of dollars per month on an ongoing basis because the interest rate was lower. Why are they offering incentives? Well, they're trying to get people into the homes. It's interesting. I don't know. Matt, maybe you have thoughts here on whether or not this is a signal of weak demand counterintuitively. New home sales are going up, but it's through the incentives. Another thing to note here is the Census Bureau noted that new housing starts were down 6% year over year in August. What's going on here, Matt?

Matt Frankel: Well, you don't have to tell me about DR Horton's incentives. I'm actually standing in a DR Horton home as I'm recording this, and it was because they incentivized us to buy it in a few different ways. To Tyler's point, home equity is at an all time high. It makes sense that a lot more people own their houses free and clear. But I push back on the demand thing. It's not necessarily that demand is weak. The demand for housing, especially entry level homes for the younger generations is off the charts strong. But affordability is what's keeping people on the sidelines for now, affordability and lack of inventory. Builder incentives are a great tool for competing against the historically low levels of existing home inventory, giving people an attractive alternative like those incentives you mentioned. In a normal housing market, about 10% of sales are new homes. Right now it's closer to 30. Lenard even said in its earnings release that achieving these results required additional incentives. It's definitely a big part of what's driving the growth for a lot of Home Builders right now.

Tyler Crowe: Look, I'm just going to throw this out there. Yes, it looks like big price cuts, but there might be a possibility that the initial price that was given was perhaps a little bit high, so it could look like we're giving somebody a great big cut. Let's keep that in a little bit of context here, because every once in a while you do things to grease the kids like that. This helps to really lay the background of what we're looking at the housing market right now. Think home sales are slow. New home sales volume is OK, but demand is really high. But it's taking a bit of greasing the skids in the form of incentives, maybe making it look like people got a great deal just to get them to sign on the dotted line. Home Builders are doing mostly better than expected. Look, if we're looking at stock prices, a lot of these trade for really cheap valuations. We're talking price to earnings ratios in the single digits, which is quite low. Let's put our necks out there. Do you, to see the Home Builders as a sector going to outpace the market over the next five years?

Jon Quast: Tyler, I won't comment on the entire sector. Maybe I can just comment on KB Home symbol KBH. You talk about greasing the skids. This is a company that doesn't seem to be greasing the skids, at least not as much as some of its competitors. It's not really offering those incentives, perhaps because it is more of a customized homebuilder, and it's actually trying to get those customizations up, the build to order homes. That's helping it with its profit margins. Yes, demand perhaps or at least revenue maybe is a little bit down. When you look at the valuation of the stock, as you point out, quite cheap. It's been able to take advantage of this with strong profits and reduce that share count by 25% in recent years. It pays the dividend. I like KB Home here.

Matt Frankel: Tyler and I have talked about this on previous shows that it's a really good profit environment for Home Builders. I think Tyler's put it you have to be an idiot to not make money as a homebuilder right now. The reason is that home prices, in general, or home values have risen a lot faster than the cost of constructing a home. Builders are they pricing some of that into their normal price, there's a lot more room in the margins towiggle around with. It's still a good profit environment for Home Builders. As far as the next five years, I'd give that a big yes with the caveat that over the next five years, mortgage rates are going to be significantly lower than they are today on average. If that's the case, and we see some of this pent up demand for especially entry level homes come back into the market, there's a lot to like about the homebuilding space right now.

Tyler Crowe: I'll put mine out there, too. Look, as you said, I think profitability has been great, and even the dumber of my two dogs could be a home builder CEO and probably make a pretty good return in this business. But I don't know if I want to put my neck out for the whole Home Builder industry because there's a couple of them out there that are run by my dumber dog. I think there's a lot of great companies in this industry, and I think picking some of the grid winners is going to do incredibly well. One company I have followed for a long time, and I know it is in the Hidden Gems universe is Green Brick Partners, ticker GRBK. But to stick my neck out there for a lot of the bad operators in this industry that could drag it down. No, I don't want to do that. I want to pick the good ones. With that in mind, we're going to take a quick break, and then after that, we're going to do stocks on our radar.

I'd say it's a little early to say this is a tradition because we're only a couple months into our hosting of Motley Fool Money. But we're going to do our best to make stocks on our radar as a regular part of our Thursday Hidden Gem show. We're going to go around the horn. And actually, this week, I'm going to start off with stocks on our radar. The company that's been really piquing my interest lately is Miami International Holdings, Ticker MIAX. This is actually a company that IPO, not too long ago, I think, a couple of months ago, recently. This is a company that has established exchange markets for equities, options, futures, commodities, and all the other things that we love to trade on a given basis. You probably don't see a lot of stocks listed on the Miami Exchange, like you would the New York Stock Exchange or NASDAQ. But MIAX is a big player in the Options Exchange game. Or it's actually the world's third-largest option trading platform actually above the New York Sack Exchange. It's also been making inroads with derivatives and ETF trading through its partnership with Bloomberg to build out indices. And the multi-strategy head funds like Citadel and Susquehanna, some of the largest option traders in the world by volume, are 5% owners of the company. I find this company fascinating because exchange market companies like Intercontinental Exchange, S&P Global, NASDAQ, the business, they bet great businesses over the long term. I'd like to see if Miami International could be one of the companies that replicates the success we've seen with exchange markets. With that, John, you're up.

Jon Quast: I love that, Tyler. That one's going on my watch list now. Thank you. I'm going to stick with our home theme, and I'm going to go with Floor and Decor holding stock. This is symbol FND. This is a stock that I think will double in value over the next five years. That's especially if the interest rates go down like Matt is talking about. If you look at the stock price, as of this taping, it is only up 3% over the last five years. But let's watch the business, not the stock. Revenue has doubled over the last five years, even though the stock price has essentially gone nowhere. You look at what it's wanting to do here. This is a home improvement retailer specializing in flooring products, has just over 250 stores now. It's looking to double that footprint over the next seven-ish years, let's say. There's a growth opportunity here. It trades at essentially the same price-to-sales ratio as Lowe's. It's much cheaper than Home Depot, even though its growth prospects are much better. I think that as interest rates come down, historically, that's when people can tap into that home equity, take out a helock, replace their flooring, do these projects. This is going to be a boom at some point over the next five years as it grows this store print, as well. This is one that I really like here. It's one that I already own, but it's one that I'm thinking to add to at these prices.

Matt Frankel: Love John's pick because I've said this before on shows. I think as mortgage rates fall, the refinancing boom we're going to see from people who bought homes at seven pt 8% mortgage rates is going to be huge, and there's a lot of companies that can benefit from that. For me, The Trade Desk, TTD, is what's jumped to the top of my watch list lately. Even after its post-earnings plunge, the stock even got worse. Now it's about 67% below its 52-week high. The disappointing 3/4 guidance wasn't nearly as bad as it looked. It was really a tough comp because The Trade Desk benefited from a lot of the election cycle advertising in the same quarter in 2024 that didn't get in 2025 for obvious reasons. I think the fears about Amazon stealing its market share are ridiculously overblown. It's essentially trading where it was in mid-2020, like Floor and Decor, like John said, although the business is far stronger now than it was back then. That's one that I am watching very, very closely right now.

Tyler Crowe: there you have it, Miami International Trade Desk, and Flon decor for stocks on our radar. Unfortunately, that's all the time we have for today. Check in tomorrow where John's gonna be joining the team for tomorrow's show along with Travis Hoyam and Lou Witman, and they're going to cover something. But for today, Matt, John, thanks for sharing your thoughts and ideas. I'm going to hit the disclosure, and let's get out of here.

As always, people on the program may have interest in the stocks they talk about, and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool Editorial standard is not approved for advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check it out on our show notes. Thanks for our producer, Bark Shannon. For Matt John and I, thanks for listening, and we'll chat again soon.

Jon Quast has positions in Floor & Decor and Starbucks. Matt Frankel has positions in Amazon and Starbucks. Tyler Crowe has positions in Green Brick Partners. The Motley Fool has positions in and recommends Amazon, Chipotle Mexican Grill, D.R. Horton, Green Brick Partners, Home Depot, Lennar, Starbucks, and The Trade Desk. The Motley Fool recommends Intercontinental Exchange, KB Home, and Lowe's Companies and recommends the following options: short October 2025 $65 calls on KB Home and short September 2025 $60 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.