Builder confidence ended the year on an uptick, but was still deep in negative territory.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) for December inched up one point to a reading of 39, well below the breakeven point of 50. The HMI index gauging current sales conditions inched up by one point to 42, the index measuring future sales rose one point to 52 and the gauge charting traffic of prospective buyers held steady at 26.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 47, the Midwest rose two points to 43, the South increased two points to 36 and the West gained four points to 34.
The latest HMI survey also found 40% of builders were cutting prices in December. The average price reduction was 5% in December, down from the 6% rate in November, and the use of sales incentives was 67% in December, the highest percentage in the post-Covid period.
“Market conditions remain challenging with two-thirds of builders reporting they are offering incentives to move buyers off the fence,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, North Carolina “Meanwhile, builders are contending with rising material and labor prices, as tariffs are having serious repercussions on construction costs.”
“In positive signs for the market, builders report that future sales expectations have been above the key breakeven level of 50 for the past three months and the recent easing of monetary policy should help builder loan conditions at the start of 2026,” said NAHB Chief Economist Robert Dietz. “However, builders continue to face supply-side headwinds, as regulatory costs and material prices remain stubbornly high. Rising inventory also has increased competition for newly built homes.”
