Builders kick off 2026 in a downbeat mood
Builder confidence dipped in January amid higher construction costs and affordability concerns, according to the NAHB — and many have reported cutting prices.
While lower mortgage rates and improvements in affordability are providing some optimism for the housing market, the same cannot be said for the construction industry.
Builder sentiment dropped this month, falling from 39 in December to 37, according to the National Association of Home Builders' (NAHB) latest Housing Market Index (HMI), which measures the health of the new home market. Builders in the Northeast remain the most optimistic with an HMI score of 45, followed by builders in the Midwest at 43. The South and West each had HMI scores of 35.
Overall builder confidence is now at its lowest level since October — which also saw a sentiment level of 37 — and has remained below the 50-point midpoint for nearly two years.
What's keeping builder sentiment low? Rising construction costs and affordability concerns are weighing heavily on builders, according to NAHB Chief Economist Robert Dietz.
"While the upper end of the housing market is holding steady, affordability conditions are taking a toll on the lower and mid-range sectors," Dietz wrote in an online post accompanying the January HMI data.
"Buyers are concerned about high home prices and mortgage rates, with downpayments particularly challenging given elevated price to income ratios," Dietz added.
Many headwinds at play: The HMI's "future sales" component also fell below 50 for the first time in several months. This is a sign that builders "continue to face several issues that include labor and lot shortages as well as elevated regulatory and material costs," according to Dietz.
Meanwhile, 4 in 10 builders said they cut prices in January. While this share is unchanged from December and November, it is still a high level for the NAHB's survey.
Builder pessimism may also be related to the housing market's sluggish fall season. While the U.S. Census Bureau's construction reports for November and December have been delayed, October's data showed a significant slowdown in construction starts and building permits for single-family homes.