Sentiment among US homebuilders is rising on the back of stimulus measures

Confidence among US homebuilders increased in December as builders continued to use sales incentives to motivate buyers.

Process content

An index of market conditions from the National Association of Home Builders and Wells Fargo rose 1 point this month to 39, the highest level since April. Still, a reading below 50 means more builders consider conditions bad than good.

READ MORE: What’s behind homebuilders’ ultra-low rates?

Mortgage rates have hovered around 6.3%-6.4% in recent months, near one-year lows, which has marginally helped push some buyers away from the sidelines. However, builders are still forced to offer price breaks and other concessions that eat into profits.

This month, 67% of builders reported taking advantage of sales incentives, a record in the post-Covid period, while a still high 40% reported they had reduced prices.

“Construction companies continue to face supply-side headwinds as regulatory costs and material prices remain stubbornly high,” said Robert Dietz, chief economist at NAHB. “Rising inventory has also increased competition for new construction homes.”

Among the components of NAHB’s survey, a gauge of sales expectations for the next six months rose 1 point to 52 in December, the third straight month in which future expectations exceeded the breakeven level. Meanwhile, current sales rose 1 point to 42, while the potential buyer traffic index was flat.

READ MORE: Borrowers Increase RICO Counts Against DR Horton, DHI Mortgage

While the Federal Reserve cut interest rates for the third time in a row last week, that is the case not clear how much that will translate into lower home financing costs. Consumer confidence data shows that many are still burdened by the persistently high cost of living.

But economists and industry analysts see a modest rebound in the housing market in 2026 as prices fall in many cities, especially in the Sun Belt region, and as the number of people locked into lower-interest mortgages declines. Home closings among publicly traded builders are expected to rise slightly next year after an expected 4% decline in 2025, Bloomberg Intelligence analyst Drew Reading said in a Dec. 1 note.

By region, sentiment among builders rose the most in the Midwest, and also picked up in the West. Sentiment in the South, the largest housing building region, fell.