Homebuilder confidence ticks up but remains low

"Homebuilding executives remain downbeat, citing a range of current conditions marked by buyer hesitancy, economic uncertainty, shrinking profit margins, increased use of incentives, and high costs. However, homebuilders whose primary focus is the strained entry-level buyer segment face the biggest hurdles. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI)'s builder confidence gauge remained range-bound at a below-par level, rising one point to 39 in December."

"The negative score represents a year-over-year decline from 46 in December 2024. NAHB's report finds that 40% of builders cut prices in December, with an average reduction of 5%. Meanwhile, homebuilders' use of sales incentives crested at 67%, the highest percentage recorded in the post-COVID era. Market conditions remain challenging with two-thirds of builders reporting they are offering incentives to move buyers off the fence, said NAHB Chairman Buddy Hughes, in a press release."

"Meanwhile, builders are contending with rising material and labor prices, as tariffs are having serious repercussions on construction costs. Despite broadly weak results, builder confidence inched higher for the third consecutive month, fueled by a brighter outlook for some time in 2026. As of December, NAHB's index is up seven points from the year's lowest reading of 32 in June, August, and September."

Homebuilding executives report weak market conditions driven by buyer hesitancy, economic uncertainty, shrinking profit margins, rising material and labor costs, and increased incentives. Builder confidence measured by NAHB/Wells Fargo HMI stood at 39 in December, down from 46 year-over-year but up seven points from midyear lows of 32. Forty percent of builders cut prices in December, averaging a 5% reduction, while 67% offered sales incentives—the highest post-COVID level. Two-thirds of builders report using incentives to move buyers off the fence. A 25-basis-point Fed rate cut and persistent sales expectations above 50 are supporting brighter loan and sales outlooks for 2026.

Read at www.housingwire.com