Builder confidence in the market for newly built single-family homes began 2026 with a downturn, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
For January, the HMI fell two points to 37, well below the 50-mark that separates professional pessimism from industry optimism. All the HMI subindices dropped – the HMI index gauging current sales conditions declined one point to 41 and the gauge charting traffic of prospective buyers dropped three points to 23.
Furthermore, the index measuring future sales fell three points to 49. NAHB Chief Economist Robert Dietz warned, “The future sales component of the HMI dipped below 50 for the first time since September, indicating that builders continue to face several issues that include labor and lot shortages as well as elevated regulatory and material costs.”
Looking at the three-month moving averages for regional HMI scores, the Northeast fell two points to 45, the Midwest held steady at 43, the South dropped one point to 35 and the West gained one point to 35.
The latest HMI survey also revealed that 40% of builders cut their prices in January, unchanged from December but the third consecutive month the share has been at 40% or higher since May 2020. Meanwhile, the average price reduction was 6% in January, up from the 5% rate in December. The use of sales incentives was 65% in January, marking the 10th consecutive month this share has exceeded 60%.
“While the upper end of the housing market is holding steady, affordability conditions are taking a toll on the lower and mid-range sectors,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, North Carolina. “Buyers are concerned about high home prices and mortgage rates, with downpayments particularly challenging given elevated price to income ratios.”
