This story was originally published in Builder.

Only 13% of adults plans to buy a house within the next 12 months, according to a quarterly Housing Trends Report survey the National Association of Home Builders has released this week.

By itself, that percentage may or may not look like a problem, but for comparison's sake, it's a little more than half the percentage who planned to buy when the same question was asked nine months ago.

Of the 13% who say they plan to buy in the next year, a small subset of that intends to purchase a new home. Less than one in five of those who indicate they're gearing up to buy a home say a new home is what they want. Some 38% indicate they'd buy either a resale or new.

Fannie Mae, meanwhile, has clocked in with a decline in its Home Purchase Sentiment Index, which has now notched down two successive months. Data among Fannie survey respondents indicating that "it's a good time to buy" shows an erosion of 5 points from a month earlier, and a year-on-year decline of 1 point, after being positive in 12-month comparisons until October.

Interest rates--an artificially low enabler on the monthly payments front for the past six years--are now near 5%, and may go up further. This is historically low, but when healthcare, transportation, education, and energy costs are at historical household payment highs, a 5% interest rate is far more meaningful than it has been in past economic and housing cycles. New York Times economics analyst Neil Irwin reports:

But that doesn’t matter if prices are out of reach relative to incomes. Moreover, lending standards have remained more rigorous than they were during the last housing boom, so it has been harder for people to stretch to buy a home. The inability of people to buy homes they can’t really afford is great news in terms of avoiding another crisis, but not so great for the near-term outlook for housing.

“Buyers can only stomach so many price increases until it gets unsustainable,” said Daryl Fairweather, the chief economist at the online brokerage Redfin. “Prices reached a breaking point where buyers were fed up and started to consider other options,” she said, including renting and moving away from the expensive coastal markets where prices are most out of whack with incomes.

Faith that demographic and broader economic fundamentals support a constructive view that housing demand can regain its footing after absorbing the initial shock of the interest rate spike is still pervasive, among both builders and housing observers.

Capital investment decision makers are not so sure, and their jitters have thrown a wet blanket over forward-looking capital placements in land and development deals.

It's time to call it.

Fundamental demand models used by many investment, development, and residential construction stakeholders, factoring in household formations, job formations, family formations, corporate profitability trends, economic growth, etc. are flawed.

When it comes to measuring real demand for housing and homeownership one of the biggest natural drivers has been a stealth factor, and here it is:

Only 27.0 percent of the nation's households include children under age 18, according to the Census Bureau's families and living arrangements data for 2018. This is a record low. The figure was 30 percent in 2010 and as high as 49 percent in 1960. Since 2010, the share of households with children has fallen in every age group under age 40 and increased in every age group 40-plus.

Again, very nearly only a quarter of U.S. households are homes headed by parents with a child under the age of 18. So, again, are home builders building the right new homes for almost three-quarters of households that do not have a child under the age of 18 living under the roof?

The one commandment--through every housing cycle known to builders of recent history is this: The right place, with the right product, at the right price.

Everyone's focused on the third part of that equation. More should focus on the second part. And of course, that means more than attention to the product itself. What matters is that builders, developers, architects, and community planners listen to, learn, engage, and excite people who live in the kinds of households that dominate the landscape now, ones that do not serve as homes of kids under the age of 18.

This story was originally published in Builder.