U.S. homebuilder sentiment improved slightly in December but remained firmly negative at the end of 2025, highlighting the ongoing pressure from high construction costs, policy uncertainty, and affordability challenges that continue to keep many potential buyers on the sidelines.
The National Association of Home Builders/Wells Fargo Housing Market Index increased by one point to 39 in December 2025, according to data released Tuesday. Sentiment stayed below the neutral level of 50 throughout the year and remained in the high 30s during the final quarter, indicating that most builders still view market conditions unfavourably.
Despite the modest uptick, builders reported that demand remains constrained. Around two-thirds said they are offering incentives to attract buyers, reflecting the impact of elevated mortgage rates and stretched affordability.
NAHB Chairman Buddy Hughes said market conditions remain difficult, noting that roughly two-thirds of builders are using incentives to encourage hesitant buyers. At the same time, he said builders continue to face rising material and labour costs, with tariffs adding further pressure to construction expenses.
Some early signs of improvement appeared in forward-looking measures. Builders’ expectations for sales over the next six months stayed above the 50 threshold for a third consecutive month, suggesting optimism that easing monetary policy could begin to improve financing conditions in early 2026.
NAHB Chief Economist Robert Dietz said that while future sales expectations have remained above the breakeven level for several months, builders are still dealing with supply-side challenges. Regulatory costs and material prices remain elevated, he said, and rising inventory levels are increasing competition for newly built homes.
Price reductions have become more common as builders attempt to stimulate demand. In December, 40% of respondents reported cutting prices, marking the second consecutive month at or above that level and the highest share since the early stages of the pandemic in 2020. The average price cut was 5%, down from 6% in November. Sales incentives were offered by 67% of builders, the highest proportion recorded in the post-COVID period.
Looking at the index’s components, the measure of current single-family sales rose one point to 42, while the indicator for future sales increased one point to 52. Buyer traffic remained particularly weak, holding steady at 26.
Regional trends were mixed. On a three-month moving average basis, builder confidence declined in the Northeast to 47, while the Midwest improved to 43. Sentiment in the South rose to 36 and in the West to 34, although both regions remain well below neutral levels.
Overall, the data indicate that while builders see potential for improvement ahead, the housing market remains constrained by affordability pressures, high costs, and growing competition, leaving confidence fragile as the industry enters 2026.
