Builder pessimism streak longest since foreclosure crisis: NAHB

Builder confidence in the new home market slipped again in June, marking more than a year of persistently weak sentiment as rising material costs, elevated mortgage rates, and an affordability crunch continue to squeeze the economics of new construction. The data signals that new home inventory is unlikely to offer much relief anytime soon.

Builder confidence in the market for newly built single-family homes fell two points to 35 in June, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released Monday. It is the 14th consecutive month that sentiment has remained below 40, a streak not seen since 2011 and 2012 during the foreclosure crisis.

More than a third of builders cut prices in June to move inventory. The share of builders reducing prices rose to 35%, up from 32% in May, while the use of sales incentives climbed to 62%, up slightly from 61% in May and marking the 15th straight month that figure has hit 60% or higher. The average price reduction held steady at 6%.

NAHB chairman Bill Owens said the supply shortfall will not close on its own.

"With the nation short about 1.2 million homes, builder sentiment will remain soft until barriers are eased and conditions improve for home building," Owens said. "Congress can help by passing the major housing package now before the Senate, along with the CONSTRUCTS Act to address the construction labor shortage and the Energy Choice Act to prevent state and local bans on natural gas in new homes."

Regulation and costs remain the problem

NAHB chief economist Robert Dietz pointed to regulatory costs as the primary culprit holding back supply.

"Costly and inefficient regulatory policy is clearly impeding the ability of builders to increase the housing supply," Dietz said. "According to a new NAHB study, government regulation, taxes, fees, and other costs add more than 26% to the price of an average single-family home. Easing permitting bottlenecks, density limits, and inefficient zoning rules would help reduce costs and support the housing growth the nation needs."

NAHB/Wells Fargo Housing Market Index, monthly readings from January 2020 through June 2026. The index peaked at 90 in November 2020 and has been below 40 since May 2025.

The individual HMI components told a consistent story. The index gauging current sales conditions fell two points to 38, future sales expectations held steady at 45, and traffic of prospective buyers remained unchanged at 25. Any reading below 50 means more builders view conditions as poor than good.

Regionally, the three-month moving averages showed the Northeast edging up two points to 44 and the Midwest holding at 43. The South fell two points to 33, and the West dropped one point to 27, making it the weakest region in the country by a considerable margin.

What brokers are watching

New construction has been one of the few corners of the market generating fresh inventory, with existing homeowners locked into low rates from 2020 and 2021 showing little appetite to sell. If builders are cutting prices and pulling back, that pipeline gets thinner at exactly the wrong time.

The 26% regulatory cost figure from NAHB's new study continues to show the pressures being put on the construction market. Tariff-driven material cost increases have compounded the problem in 2026, and with mortgage rates sitting at 6.52% as of last week's Freddie Mac survey, the affordability math on new construction is a tough sell for a large share of potential buyers.

The HMI has been below 50 for over two years, but 14 months below 40 shows a continued, sustained pessimism from builders. The NAHB believes that until rates come down or regulatory and material costs ease, builders are not going to feel good about putting shovels in the ground.

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