Builder confidence improved modestly in August, offering a small lift to the U.S. housing market while remaining firmly in negative territory. The National Association of Home Builders’ latest Housing Market Index rose one point to 35, as elevated construction costs, uncertain economic conditions and hesitant buyers continued to weigh on home building activity.
Key takeaways
- The national Housing Market Index increased to 35 in August, still below the neutral reading of 50.
- Current sales conditions improved two points to 39.
- Future sales expectations and buyer traffic remained unchanged at 43 and 23.
- The Midwest was the strongest-performing region, while the South and Northeast weakened.
- At least 30% of builders have cut prices for 16 consecutive months.
The improvement was limited, suggesting that builders remain cautious despite a slight strengthening in current sales conditions. The overall index has now stayed below 40 for 16 consecutive months, underscoring the persistence of weakness across much of the new-home market.
Regional results show a divided market
Three-month average HMI scores varied considerably by region. The Northeast declined one point to 44, while the Midwest held steady at 45. The West also remained unchanged, but at a much weaker 27. The South slipped two points to 31, reflecting continued challenges in the nation’s largest home-building region.
The Midwest stood out as a relative bright spot. New-home sales there have increased by more than 2% so far in 2026, giving builders in the region a stronger foundation than their counterparts elsewhere.
Costs and buyer hesitation remain major obstacles
Builders continue to face rising expenses for labor, materials and transportation. Higher gasoline and diesel prices are adding to those pressures, making it more difficult to deliver homes at prices many buyers can afford.
At the same time, prospective buyers remain cautious. Weak traffic from potential purchasers, reflected in an index reading of 23, indicates that high borrowing costs, affordability concerns and broader economic uncertainty are keeping many households on the sidelines. Speculative, or “spec,” home construction remains particularly soft as builders limit projects without a committed buyer.
Custom and smaller-market builders fare better
Market conditions are not uniform across the industry. Custom-home builders continue to report stronger performance than spec builders, supported by demand from higher-income buyers who are less sensitive to financing and affordability pressures.
Smaller, less densely populated markets are also outperforming larger metropolitan areas. Smaller builders are reporting comparatively better conditions than larger companies, suggesting that flexibility and lower operating costs may provide an advantage in a difficult market.
Outlook remains cautious
The August results point to stabilization rather than a broad recovery. Builders may benefit if financing conditions improve and buyer confidence returns, but continued price reductions show that demand remains difficult to sustain. Until construction costs moderate and more buyers re-enter the market, the industry is likely to face a slow and uneven path forward.