The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) reported that builder confidence in the market for newly built single-family homes declined one point to 36 in February.
Persistent affordability difficulties, such as high house price-to-income ratios and rising land and construction prices, contributed to builder confidence falling for the second month in a row to begin the year.
At the beginning of 2026, housing affordability remains a concern.
The solution for the housing market is to implement regulations that will bend the construction cost curve and allow for an increase in the supply of affordable houses.
On the plus side, lower interest rates for mortgages and construction loans should remain possible as inflation falls.
According to the current HMI poll, 36% of builders reduced their pricing in February, down from 40% in January.
While this represents the lowest rate of price cuts since May (34%), the average price decrease remains around 6%.
In February, sales incentives were used at 65%, which was unchanged from January and marked the 11th consecutive month that this share topped 60%.
While the majority of builders continue to provide buyer incentives such as price reductions, many potential purchasers remain on the sidelines.
Although demand for new construction has weakened, renovation demand has remained strong because to a lack of household mobility, according to HMI builder statements.
The NAHB/Wells Fargo HMI is based on a monthly survey that NAHB has conducted for over 40 years.
It assesses builder perceptions of current single-family home sales and sales projections for the next six months as “good,” “fair,” or “poor.”
The study also asks builders to categorize prospective buyer traffic as “high to very high,” “average,” or “low to very low.”
The scores for each component are then used to produce a seasonally adjusted index, with any value more than 50 indicating that more builders see conditions as excellent than poor.
From January to February, the HMI index monitoring current sales conditions remained constant at 41, while the index measuring future sales decreased three points to 46 and the gauge charting prospective buyer traffic fell two points to 22.
Looking at the three-month moving averages for regional HMI scores, the Northeast lost one point to 43, the Midwest remained at 43, the South declined one point to 35, and the West fell two points to 33.
The HMI tables can be obtained at nahb.org/hmi.
[Read more about this topic on Eyeonhousing.org]