Continuing challenges to affordability—namely higher construction and financing costs—once again kept builder confidence in the negative territory, according to the latest data from the National Association of Home Builders (NAHB).
The latest NAHB/Wells Fargo Housing Market Index (HMI) saw builder confidence slip one point to 36 in February, following the two-point fall seen in January and continuing the negative trend (meaning the index is below the 50 point breakeven mark, indicating negative sentiment) seen through the end of 2025.
In addition, the HMI index gauging current sales conditions remained at 41 from January to February; the index measuring future sales fell three points to 46 and the index charting traffic of prospective buyers fell two points to 22.
“Builders reduced their expectations for future sales as buyers report affordability challenges, which is contributing to declining consumer confidence for the overall economy,” said NAHB Immediate Past Chairman Buddy Hughes.
As affordability challenges persist, so does the need for builders to offer incentives. The HMI found that 36% of builders cut prices in February, down from 40% in January. The average price reduction remains at 6%. The use of sales incentives was 65% in February, unchanged from January, and marking the 11th consecutive month it has exceeded 60%.
NAHB Chief Economist Robert Dietz said that the solution for the housing market going forward is the “enactment of policies that will bend the construction cost curve and enable additional supply of attainable housing.”
There has been a significant increase in focus on housing in government as of late, with the House of Representatives recently passing the Housing for the 21st Century Act with the goal to increase housing supply in the U.S. through removing certain building and lending regulations as well as adjusting certain programs overseen by the Department of Housing and Urban Development (HUD). The Senate also passed a bipartisan housing package, the Road to Housing Act, with similar goals as the House bill but with several different provisions.
Looking ahead, Dietz also noted that “easing inflation should continue to allow lower interest rates for mortgages and builder loans.” Hughes noted that while new construction demand has weakened, “remodeling demand has remained solid given a lack of household mobility.”
This tempered optimism for the year ahead aligns with recent reports, with the latest housing starts data showing a large jump at the end of 2025, alongside a similar surge in new-home sales.
