Affordability Concerns Continue to Pressure Builder Sentiment, NAHB Says

The agency said demand for new construction has weakened, but remodeling remained strong because of low household mobility.

Construction workers work on the roof of a house being built in Alhambra, Calif., on Sept. 23, 2024. Frederic J. Brown/AFP via Getty Images

Housing affordability continues to pressure homebuyers and builders, with homebuilder confidence dropping for the second consecutive month to open the new year.

Builder confidence for erecting new single-family stick-built homes dipped by one point to 36 in February, the National Association of Home Builders (NAHB) and Wells Fargo said in their latest housing market index report released on Feb. 17.

The NAHB has conducted the survey for more than four decades as a gauge of present and future sales of single-family homes, as well as the prospective pool of buyers. Any number lower than 50 equals a weak outlook on current housing market conditions.

NAHB Chairman Buddy Hughes said builders lowered their expectations of future sales because of continued high housing costs that have priced many potential homebuyers out of the market.

“While the majority of builders continue to deploy buyer incentives, including price cuts, many prospective buyers remain on the sidelines,” said Hughes, a third-generation homebuilder and owner of Hughes Design and Construction in Lexington, Kentucky.

“Although demand for new construction has weakened, remodeling demand has remained solid given a lack of household mobility.”

According to a recent study by the NAHB, more than 88.2 million U.S. households are unable to afford a home at the national median cost of $413,595 with a mortgage interest rate of 6 percent. A modest $1,000 increase in cost would price out an additional 156,405 Americans from buying a home, according to the association.

The NAHB’s most recent housing market index study found that 36 percent of homebuilders slashed prices by 6 percent or more in February, down from 40 percent who did so a month earlier. Also, 65 percent of builders used sales incentives to draw in potential homebuyers, unchanged from January.

Robert Dietz, chief economist for the NAHB, said housing affordability is a primary challenge to overcome in 2026.

“The solution for the housing market is the enactment of policies that will bend the construction cost curve and enable additional supply of attainable housing,” Dietz said.

“On the positive side, easing inflation should continue to allow lower interest rates for mortgages and builder loans.”

Builder sentiment was softest in the West at an index rating of 33, followed by the South at 35. Builder sentiment was slightly better in the Northeast and Midwest at 43.

Builders said the biggest hurdles they face in 2026 include elevated interest rates (65 percent, down from 84 percent in 2025) and buyer sentiment that home prices will decline in the future if they hold off on making a purchase (74 percent).

Looking back on the past year, builders said high costs for land and a lack of available lots, along with labor shortages and the high cost of builder materials, were the most significant challenges they faced in 2025. Those three issues continue to be the main challenges homebuilders face in 2026, the NAHB said.