Builder sentiment rises modestly, but buyers remain on the sidelines
Homebuilder confidence saw a minor lift in July following the passage of the so-called 'One Big Beautiful Bill,' but broader housing market sentiment remains under pressure from persistent affordability challenges, elevated interest rates, and lagging buyer traffic.
Overall builder sentiment rose to 33, up one point from June, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). Despite the uptick, the index has now been in negative territory for 15 straight months, with continued weakness across key indicators.
NAHB chairman Buddy Hughes credited the new tax-and-spend legislation for offering some relief, though acknowledged broader conditions remain difficult.
“The passage of the One Big Beautiful Bill Act provided a number of important wins for households, home builders and small businesses,” Hughes said in the report. “While this new law should provide economic momentum after a disappointing spring, the housing sector has weakened in 2025 due to poor affordability conditions, particularly from elevated interest rates.”
Deeper price cuts
The July HMI survey showed an ongoing trend of builders reducing prices to attract hesitant buyers. 38% of builders reported price cuts, the highest level since NAHB began tracking this monthly in 2022. This marks a slight rise from 37% in June and continues a four-month upward streak from 29% in April. The average price reduction held steady at 5%, a level unchanged since November 2024.
Meanwhile, 62% of builders reported using sales incentives, consistent with June's level, signaling that promotions remain a crucial tool in maintaining buyer interest.
“The second half of the year is likely to remain a buyer’s market as interest rates remain elevated,” Foundation Mortgage CEO Marc Halpern said. “Listed inventory is taking longer to sell, as potential buyers look for the best deals in their area. In South Florida, locals who were previously priced out are seeing the silver lining as home values correct themselves, as fewer people are relocating into the state.”
The three-month moving average of regional builder sentiment showed mixed results. The Northeast rose by two points to 45, and the Midwest held flat at 41. Meanwhile, the South slipped by three points to 30, and the West also declined by three points, landing at 25.
Traffic and permits decline
Despite modest optimism for future sales, on-the-ground buyer activity remains weak. The HMI component tracking prospective buyer traffic dropped one point to 20, the lowest reading since late 2022.
The gauge for current sales conditions increased slightly to 36, and expectations for sales over the next six months rose three points to 43. Still, these readings remain well below the threshold of 50, which indicates a majority of builders view conditions as good.
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NAHB chief economist Robert Dietz warned that affordability issues are unlikely to ease in the short term.
“Single-family housing starts will post a decline in 2025 due to ongoing housing affordability challenges,” Dietz said, citing a 6% year-to-date drop in single-family permits and buyer traffic at its lowest level in more than two years.
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