Homebuilders Are Still Pessimistic, As Builder Confidence Plateaus 

Homebuilder confidence plateaued in August as mortgage rates remain elevated, continuing to weaken buyer traffic, and builders continue to grapple with supply-side challenges, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Monday. The index fell one point from July to a reading of 32. The index has hovered between 32 and 34 since May 2025. 

“Affordability continues to be the top challenge for the housing market and buyers are waiting for mortgage rates to drop to move forward,” Buddy Hughes, the chairman of the NAHB, said in a statement. “Builders are also grappling with supply-side headwinds, including ongoing frustrations with regulatory policies connected to developing land and building homes.”

Builders turn to price cuts to move inventory

As builders look to improve buyer traffic and offload inventory in August, 37% of them turned to price cuts. While this is down slightly from 38% in July, this share has remained at 37% or 38% for the past three months. The average price cut made by these builders remained at 5%, where it has been since November of 2024. In addition to price cuts, builders are also using sales incentives to drive traffic to their properties, with 66% of builders reporting that they are using sales incentives in August, up from 62% in July and marking the highest percentage in the post-COVID era. 

In addition, the NAHB reported that homebuilders’ gauge of current sales conditions fell one point to 35. The gauge, which measures traffic of prospective buyers. posted a two-point increase to a reading of 22, while the component charting sales expectations over the next six months held steady at 43.

Three regions show downward movement

Regionally, the three-month moving averages fell in three out of four regions, with the Northeast (44), South (29) and West (24) all declining one point month-over-month. The Midwest posted a one point gain in August, rising to 42. 

With the Federal Reserve meeting next month to discuss monetary policy, given the weakness of builder confidence, the NAHB’s chief economist is urging the Fed to cut rates.

“Housing affordability is central to the outlook for economic growth and inflation,” Robert Dietz said in a statement. “Given a slowing housing market and other recent economic data, the Fed’s monetary policy committee should return to lowering the federal funds rate, which will reduce financing costs for housing construction and indirectly help mortgage interest rates.”