Tepid spring selling, strong headwinds buffet builder confidence

The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index released on Monday found that homebuilder confidence remained low, falling two points to 35 in June. This marked the 14th straight month that confidence was below 40, the longest streak NAHB has recorded since 2011 to 2012, in the wake of the Great Financial Crisis.

Coming midway through a year of dashed expectations, rekindled hopes and an unrelenting trench-warfare-like grind against a vague, know-it-when-you-feel-it force of hesitancy among consumer households weighing whether now’s the moment or not to try to buy a home, the June builder sentiment print comes as little surprise.

The path to this point had, by and large, seen homebuilders entering 2026 with guarded optimism.

This presentiment wasn’t based on the belief that 2026 would be record-setting. Instead, the hope was that 2025 may have represented the floor of a down cycle and that the industry was poised for a gradual, modest recovery. 

However, this cautiously positive outlook rested on the expectation that no new external headwinds would emerge to disrupt the market. The Iran war, which injected uncertainty into the economy and continues to keep mortgage rates elevated and could do so for the rest of the year, definitely did not play into most outlooks at the start of the year.

Spring selling season, by almost any measure, fell short of expectations. In March, new home sales increased 3.3% year over year, but the median sales price fell 6.2%, indicating that builders ramped up incentives to keep sales activity positive. In their own terms, homebuilders were “buying” sales. In April, new home sales were down 11.3% year over year. May’s new home sales data, which comes out next week, may paint a similar picture.

“The latest HMI survey also revealed that 35% of builders cut prices in June, up from 32% in May. The average price reduction was 6% in June, the same rate as the previous month,” wrote Robert Dietz, Chief Economist at the National Association of Home Builders. “The use of sales incentives was 62% in June, up slightly from 61% in May, and marking the 15th consecutive month this share has reached 60% or higher.”

Of particular concern were confidence declines in two of the more typically prolific new-home construction regions, Dietz wrote, noting, “the South fell two points to 33 and the West dropped one point to 27.”

One homebuilding executive who spoke with HousingWire TBD summed up the spring selling season in three words: “Buyers under distress.”

Another executive said that some of their communities could see a $30,000 price drop and still not generate sales. 

Yet another noted that the spring selling season has been inconsistent, with a strong month followed by a much slower month. This uncertainty makes forward planning difficult. 

Other homebuilding leaders contend that there is pent-up demand in the market, but elevated mortgage rates and economic uncertainty are keeping many of those buyers on the sidelines.

Meanwhile, many homebuilders, particularly those that serve entry-level buyers who are sensitive to mortgage rates, still-high asking prices and economic volatility, may need to choose between incentivizing new sales and tapping the brakes – possibly even taking the summer off – until conditions improve. 

Economic anxiety bites

California-based Rurka Homes, ranked 84th in the HousingWire Homebuilder Rankings, operates in a market that many would consider ground zero for the nation’s housing affordability crisis. The San Francisco metro area, with a median home price of more than $1.3 million, is one of the most expensive metro areas in the country, only overshadowed by the adjacent San Jose market, where the median home price is about $2 million. 

Rurka Homes, based in neighboring San Joaquin County, builds homes on the edge of the Bay Area bordering California’s Central Valley, predominantly in a suburban community called Mountain House. The builder’s homes, mostly 4- or 5-bedroom houses that range in size from 2,100 to nearly 4,000 square feet, typically sell for between the $800s and just over $1.3 million. 

Mountain House, located over 50 miles east of San Francisco, is a prototypical upper-middle-class commuter town. Rurka Homes President Nick Arenson told HousingWire TBD that the firm’s typical buyer is a family-focused commuter who’s trading in a townhome or smaller house for a larger detached home with a longer commute to major job centers. 

The spring selling season, Arenson acknowledged, has been tough. 

“A lot of buyers were hoping to buy based on the idea of future lower mortgage rates,” Arenson said. “Then, going into this year, people had some hopes that we could see them finally lowering interest rates and that we’d have more certainty, and of course, we’ve had less certainty and increasing rates. I think that’s the primary story,” Arenson said. 

In the Bay Area, a nationwide wave of high-profile tech layoffs and growing concerns about AI-driven job displacement are also weighing on homebuyer confidence. Rurka argued that the job market in San Francisco and Silicon Valley hasn’t been hit as hard by layoffs as other tech-heavy markets like Seattle or Austin. Still, the headlines are giving some buyers jitters. 

“There’s the talk of it, which makes people nervous, and the nervousness doesn’t help, right? Add in gas prices, the interest rates and everything else, and there is uncertainty,” Rurka said. 

Commuters feel the pinch

Beyond higher rates and lingering economic uncertainty, the high cost of gas, with prices reaching nearly $6 a gallon locally in Northern California, reared up as an unforeseen concern for commuters. 

Data from John Burns Research & Consulting (JBREC) found that, unsurprisingly, high gas prices hampered demand most prominently in peripheral commuter towns, where affordability-driven buyers trade lower prices for longer commute times. 

According to JBREC, the typical new-construction homeowner commutes about 12% more than the average homeowner who commutes by car, because new construction is disproportionately located in outlying areas. 

With the price of gas still averaging about $4 a gallon nationally, the communities hit the hardest are located in peripheral areas, such as the Stockton, CA, market, where Rurka Homes operates. The Stockton market has the largest percentage difference in commute time between new-construction homeowners and all other homeowners. New construction homeowners commute in the Stockton market 41% more, largely due to incoming residents who are priced out of Bay Area suburbs. 

Although the price of gas may not be a make-or-break issue for most homebuyers, it certainly adds to the level of economic anxiety and financial burden many consumers are feeling at the moment.

Pockets of strength and weakness

Not all housing markets perform at the same level, even when they are located within the same state. Chris Winter, President of Homebuilding at Utah-based Cole West, ranked 49th on HousingWire’s Homebuilder Rankings, spoke to this point. 

Cole West’s homebuilding operations are predominantly concentrated in Southern Utah, but the company has recently focused on bolstering deliveries in the northern suburbs of Salt Lake City as well. The spring selling season, Winter said, has been mixed. 

“I would say that it’s been a tale of two stories for Northern Utah and Southern Utah. Northern Utah started out pretty slow. January, February and March were kind of slow, but now that we are in the middle of June, we’re actually on our targets. Virtually every community has hit their numbers, and a couple have exceeded. There’s been, obviously, a couple that have been short, but we’re actually on pace for all of our sales targets for the year,” Winter said. “I wouldn’t say that we’re running along swimmingly, and that we’re all wearing party hats. In a couple of places, we’ve had to increase incentives to be able to hit those numbers.”

The Southern Utah division, concentrated in the southwestern portion of the state, has taken an opposite track. January and February started strong, Winter said, but the spring selling season has been slow. 

“Since then, it’s been really, really slow, to the point where we’re off like 35% year-to-date from our sales goals,” he said. 

Many of the southern division’s sales, Winter noted, come from vacation homes, which haven’t performed well over the last few months, especially in lower price points. 

Some affordability bright spots remain

Topeka, Kansas, with an average home price of just over $195,000, is one of the more affordable markets in the country. Located about an hour west of Kansas City, the town offers proximity to a metro area with a population of more than 2 million people, but at a discount. In Topeka, raw land is cheap, and there are ample lots available for development.

Topeka-based Gen III Construction & Development offers newly built 3-bedroom homes in Topeka for about $275,000. Walker Bassett, the company’s founder and CEO, said there is strong demand for homes at this price, but homes that creep too far into the $300s may sit on the market for a long time. 

As construction costs continue to rise, builders like Gen III Construction & Development must confront the challenge of delivering homes at price points buyers can afford while maintaining healthy margins to support their business.

“These cheaper houses don’t have much margin, so they’re harder to build, but we find that there’s a lot more demand,” Bassett said. 

Even though margins on many of these homes may be tight, the company is finding that sales on the more affordable products are doing quite well. That is, as long as the right home is delivered at the right price. 

“There are obviously some economic disruptions that we’re seeing on the global and national scale. I’d say that we haven’t really felt that any more than a hiccup. As things started getting louder, it seemed like there was a little bit of a pause, but April was the strongest month that our broker had in the last six years,” Gen III Construction & Development COO Dalton Cowan said.