New home builder sentiment posts a modest gain in August but remains mired for a 16th straight month below 40
Home builder confidence edged up one point to 35 in August, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The reading marks a 16th consecutive month the gauge has remained below the 40-point threshold, the longest such stretch since 2012.
The single-point gain offered little comfort to mortgage professionals navigating a new-home market still defined by price cuts, hesitant buyers, and fuel-driven construction cost increases.
New home sales have slipped amid mounting affordability pressure throughout much of the year, and Monday's data signals that inventory relief from the new-construction channel remains distant.
"While builder sentiment edged higher in August, builders continue to contend with high construction costs and broader economic uncertainty," said Bill Owens, NAHB Chairman and a home builder and remodeler from Worthington, Ohio.
"Rising gas and diesel prices are pushing up material costs, and spec home building remains weak as many prospective buyers stay on the sidelines. However, the Midwest remains a bright spot for the home building industry, with new home sales up in that region more than 2% so far in 2026."
Gasoline prices exceed $4 a gallon nationally, approximately 30% higher than a year ago, according to AAA. Diesel averages $5.45 a gallon, nearly 50% above last August. Both figures have been driven higher by disruptions to global energy markets tied to the Iran conflict.
Moreover, rates near their highest level in over a year have compounded the squeeze. The 30-year fixed-rate mortgage sat at 6.69% for the week ending August 6, before slipping two basis points to 6.67% for the week ending August 13.
Price cuts extend into a 16th month
The August survey found 35% of builders reduced prices to attract buyers, down marginally from 37% in July, with the average price reduction holding steady at 6%.
Meanwhile, 63% of builders deployed some form of sales incentive, a proportion that has barely moved in months.
"Our latest builder survey continues to show signs of weakness in the home building market," said NAHB Chief Economist Robert Dietz.
"August marked the 16th straight month that at least 30% of builders reported cutting prices to support demand, as well as the 16th consecutive month with the HMI below 40. Custom home builders continue to report stronger market conditions than spec builders, reflecting better conditions at the higher end of the market. Smaller, less dense markets are also outperforming larger metropolitan areas, and smaller builders report relatively stronger conditions than larger builders."
US home prices rose 1.0% year over year in July, marking a third consecutive month near that pace, according to First American Data & Analytics' Home Price Index (HPI).https://t.co/0Z0ZJvrW6q
— Mortgage Professional America Magazine (@MPAMagazineUS) August 17, 2026
Regional divide widens
The index measuring current sales conditions rose two points to 39, its highest since May. Future sales expectations and buyer traffic held unchanged at 43 and 23, respectively.
A traffic reading of 23 signals that the overwhelming majority of builders view foot traffic as low to very low, a result that tracks closely with softening purchase origination volumes across the broker channel.
Regionally, the Midwest three-month moving average held steady at 45, the strongest performer nationally, while the Northeast slipped one point to 44. The South fell two points to 31, and the West was unchanged at 27.
Earlier in 2026, Darshit Chokshi, chief executive of Aequitas Mortgage, told Mortgage Professional America that builder incentives risk masking structural affordability problems rather than resolving them.
"New build homes are still priced very high," Chokshi said. "Builders, as we all know, offer incentives to cover closing costs or buy down rates."
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