Index slid as incentives persisted and buyers stayed cautious
Builder confidence in the United States new-home market edged lower in February as affordability pressures, high construction costs and cautious buyers continued to restrain demand, the latest National Association of Home Builders/Wells Fargo Housing Market Index showed.
The closely watched gauge slipped to 36, down from 37 in January and its weakest reading since September, extending a run of nearly two years below the 50 neutral mark.
A reading below 50 indicated more builders viewed conditions as poor than good.
Affordability concerns already pushed the index down from 39 in December, with January’s report highlighting broad-based softness in sales expectations and buyer traffic. In February, those pressures persisted even as inflation eased and borrowing costs drifted lower from 2025 peaks.
Builders leaned on incentives as buyers held back
NAHB’s latest survey showed that 36% of builders reported cutting prices in February, down from 40% in January but still a historically elevated share. Average discounts held at 6%. Sales incentives of some kind were used by 65% of respondents for an 11th consecutive month above 60%.
“Builders reduced their expectations for future sales as buyers report affordability challenges, which is contributing to declining consumer confidence for the overall economy,” NAHB chairman Buddy Hughes, a builder from Lexington, N.C., said.
“While the majority of builders continue to deploy buyer incentives, including price cuts, many prospective buyers remain on the sidelines. Although demand for new construction has weakened, remodeling demand has remained solid given a lack of household mobility.”
The index component tracking current sales conditions held at 41 from January to February, while the measure of expected sales over the next six months fell three points to 46.
The gauge of prospective buyer traffic slipped to 22, underscoring how few house hunters were actively touring new communities.
Policy and rate path remained key unknowns
“Housing affordability remains an ongoing challenge at the start of 2026,” NAHB chief economist Robert Dietz said.
“The solution for the housing market is the enactment of policies that will bend the construction cost curve and enable additional supply of attainable housing. On the positive side, easing inflation should continue to allow lower interest rates for mortgages and builder loans.”
Those comments echo NAHB and market-watchers’ warnings over the past year that elevated material and labor costs, alongside still-high mortgage rates, kept confidence fragile even when headline readings ticked up.
Regionally, three‑month average confidence slipped in the Northeast and South, held flat in the Midwest and fell in the West, suggesting that no major region fully escaped the affordability squeeze.
Meanwhile, builders have been leaning heavily on price cuts and incentives while buyer traffic stayed weak.
“Nearly one in five new homes cut prices, more than in the resale market for the first time in recent history. This is not just a reflection of regional divergence and where new homes are built; we are seeing builders compete more directly on price to keep sales moving, even as overall new-home prices remain relatively stable,” said Danielle Hale, chief economist at Realtor.com.
Data showed 19.3% of new‑construction listings with price reductions in the fourth quarter of 2025, compared with 18% of resale listings nationwide, with cuts concentrated in the South and West.
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