Rising rates, labor shortages and surging costs are draining builder confidence nationwide
Builder confidence in the newly built single-family home market dropped to its lowest point in a year in September, as climbing mortgage rates, persistent construction costs, and weakening buyer traffic combined to widen a housing supply gap that has challenged brokers and borrowers throughout 2026.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell three points to 32 this month, the weakest reading since September 2025.
"Buyer traffic has weakened across much of the country, largely because of rising mortgage rates," said Bill Owens, NAHB chairman and a home builder and remodeler from Worthington, Ohio.
"Builders also continue to face higher material costs, rising gas and diesel prices and persistent labor shortages. In some markets, builders report that increased immigration enforcement is discouraging legal workers from reporting to job sites."
Price cuts deepen as incentive use climbs
Price reductions are becoming structurally embedded rather than a short-term promotional response. In September, 38% of builders reduced prices, up from 35% in August. The average price cut held at 6% for the sixth consecutive month, a figure that underscores how little movement there has been in the economics of new construction despite months of discounting.
Meanwhile, 66% of builders reported using sales incentives this month, up from 63% in August and the highest share since December's 67%.
"The HMI shows builder confidence at its lowest level since September 2025, as tight lending conditions and elevated land, labor and construction costs persist," said Robert Dietz, NAHB chief economist.
"Notably, 42% of builders rated current lot availability as poor and 38% as fair."
Even where demand exists, the supply-side economics of bringing new homes to market remain under strain. As high mortgage rates continue to keep the US housing market subdued through the rest of 2026, builders face a narrowing pool of buyers who can absorb even discounted new construction at current borrowing costs.
All three HMI component indices deteriorated in September. The measure of current sales conditions fell four points to 35, and the gauge tracking sales expectations over the next six months dropped six points to 37. That's a steep slide suggesting builders have turned more cautious about the near-term pipeline.
Prospective buyer traffic held flat at 23, a level at which the overwhelming majority of builders view foot traffic as low to very low.
Jay Lessard, President and Senior Loan Officer at Sonoran Lending, says rising rates are prompting more conversations around home equity solutions and debt management, but he doesn't expect higher borrowing costs to completely derail housing demand.https://t.co/JdcZu0L3eQ
— Mortgage Professional America Magazine (@MPAMagazineUS) September 17, 2026
Regional breakdown shows broad-based pressure
The September pullback is consistent with a pattern that has defined much of 2026: brief recoveries in sentiment followed by reversals when rate and cost pressures reassert themselves.
Builder confidence posted a modest gain in August only to give back ground one month later, and the three-month moving averages now reflect softening across most of the country.
The Northeast recorded the steepest regional decline, falling five points to 39, while the Midwest slipped one point to 44, the strongest reading nationally and the one region where new home sales have shown some resilience in 2026.
The South dipped one point to 31, and the West edged up one point to 28, though it remains the softest market in the country.
For mortgage brokers, the September data arrives on the heels of a difficult second quarter. Housing affordability declined through Q2 2026 as climbing mortgage rates pushed monthly cost burdens higher across both median- and low-income households.
That's a dynamic that has compressed the buyer pool at exactly the moment new construction inventory was expected to provide some relief.
Until borrowing costs fall or construction economics stabilize, the September index suggests that relief is not coming soon.
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