Builder confidence in the single-family home market declined at the beginning of 2026, as ongoing affordability issues and increasing construction costs continue to affect buyers and builders. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) showed a two-point drop to 37 in January.
"While the upper end of the housing market is holding steady, affordability conditions are taking a toll on the lower and mid-range sectors," said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C. "Buyers are concerned about high home prices and mortgage rates, with downpayments particularly challenging given elevated price to income ratios."
NAHB Chief Economist Robert Dietz noted a recent improvement in mortgage rates: "In a positive development, Freddie Mac reported that the average mortgage rate fell to 6.06% as of Jan. 15, the lowest rate in three years and nearly 100 basis points below the same period last year."
Most responses for the January HMI survey were collected before Fannie Mae and Freddie Mac announced plans to purchase $200 billion in mortgage-backed securities to help lower interest rates. According to Dietz, this policy action was not reflected in most survey responses, but builders still face several supply-side challenges.
"The future sales component of the HMI dipped below 50 for the first time since September, indicating that builders continue to face several issues that include labor and lot shortages as well as elevated regulatory and material costs," Dietz said.
The survey found that 40% of builders reported cutting prices in January—unchanged from December but marking three consecutive months at or above this level since May 2020. The average price reduction increased to 6% in January from 5% in December. Sales incentives were used by 65% of builders during January, continuing a trend where more than 60% have offered such incentives for ten straight months.
The NAHB/Wells Fargo HMI is based on a monthly survey conducted by NAHB for over four decades. It measures builder perceptions of current single-family home sales and sales expectations for the next six months as "good," "fair," or "poor." Builders also assess traffic from prospective buyers as "high to very high," "average," or "low to very low." The index is seasonally adjusted; readings above 50 indicate more positive than negative sentiment among builders.
All subindices of the HMI decreased in January. The index measuring current sales conditions dropped one point to 41; prospective buyer traffic fell three points to 23; future sales expectations declined three points to 49—the first time it has been below breakeven since September.
Regional HMI scores based on three-month averages showed declines or stagnation: Northeast fell two points to 45, Midwest remained at 43, South dropped one point to 35, while West gained one point reaching 35.
For detailed tables and additional statistics related to builder sentiment and housing data, readers can visit nahb.org/hmi or access more information at Housing Economics PLUS.
The NAHB stated that with no official release schedule yet available from the U.S. Census Bureau for the Survey of Construction in 2026, they will publish February's HMI results on February 17. A full schedule will be released when possible.
