Builder confidence falls in July as affordability pressures persist

Homebuilder confidence fell again in July as affordability pressures and economic uncertainty continued to weigh on demand, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released on Thursday. 

According to the index, homebuilder confidence in July fell 2 points to a reading of 34, marking the 15th consecutive month with a reading below 40. The decline reflects ongoing headwinds from high mortgage rates and broader economic uncertainty impacting prospective homebuyers, compounded by elevated costs for land, labor and construction materials that continue to weigh on margins. 

The HMI additionally reported a negative reading on present sales (37), traffic of prospective buyers (23) and the outlook for the next six months (43).

In July, 37% of builders reported price cuts, an increase from 35% in June. The average price reduction held steady at 6%, and the share of builders that reported using sales incentives ticked up slightly to 63%, representing the 16th consecutive month this share has reached 60% or higher.

“Many potential buyers remain on the sidelines as they wait for lower mortgage rates, more certainty on inflation and a clearer economic outlook,” NAHB Chairman Bill Owens said in a statement. “The recently enacted 21st Century ROAD to Housing Act contains important provisions on land-use and zoning, regulatory reform and financing tools that address obstacles facing builders and buyers, but these reforms will take time to implement.”

“With the HMI below 40 for 15 straight months, affordability remains the home building industry’s primary challenge, as elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages continue to affect the market,” NAHB chief economist Robert Dietz added.

“Looking ahead, the newly enacted housing law is a positive step that will help expand housing supply and lower overall housing costs, although more policy change is needed at the state and local level.”

The recently released June 2026 BTIG/HomeSphere monthly homebuilder survey, which surveys small- and mid-sized homebuilders, also found that homebuilders, by and large, remained cautious. 

According to the survey, sales rose for a second consecutive month, but only 35% of builders reported higher year-over-year sales, while 27% reported lower year-over-year sales. 

Customer traffic strengthened more sharply, the survey found. In June, 38% of builders reported higher year-over-year traffic, nearly doubling the 20% who reported higher traffic in May and nearing February’s recent high of 43%. Traffic had been steadily deteriorating from February through May, partially due to increased economic and geopolitical uncertainty. 

The survey additionally reported that 29% of builders said June sales were better than expected, while 31% reported worse-than-expected sales. Traffic relative to expectations was also relatively weak, as only 27% of builders reported better-than-expected traffic, while 33% reported worse-than-expected traffic. 

Additionally, 19% of builders raised some, most or all base prices in June, while 15% lowered them. Incentive activity was largely unchanged as well, with 29% of builders increasing some, most or all incentives; 6% decreasing incentives; and 54% reporting no changes. 

A weaker-than-expected spring selling season

The survey results come amid a weaker-than-expected spring selling season for homebuilders, who entered 2026 with cautious optimism. But economic uncertainty stemming in part from the Iran conflict kept many prospective buyers on the sidelines.

In March, new home sales increased 3.3% year over year, but the median price fell 6.2% to $387,400. This implies that economic and geopolitical uncertainty impacted homebuyer demand. 

In April, new home sales fell to a seasonally adjusted annual rate of 622,000, representing a 6.2% decline from March and an 11.3% annual decline. At the same time, median sales prices ticked up 2.2% year over year and 8% from March to $422,500, indicating that builders deployed incentives to keep price growth positive. 

In May, new home sales fell to a seasonally adjusted annual rate of 580,000, down 7.3% from April and down 6.8% year over year. On the bright side for builders, the median price rose 2% to $424,900. 

The June new home sales data, scheduled for release next week, will likely offer an important look into how the tail end of the spring selling season performed.