U.S. homebuilder confidence edged higher in December but remained firmly in pessimistic territory to end 2025, underscoring the persistent strain of high construction costs, policy uncertainty and affordability pressures that continue to sideline would-be buyers.
The National Association of Home Builders / Wells Fargo Housing Market Index rose one point to 39 in December 2025, according to data released Tuesday. Sentiment stayed below the breakeven level of 50 throughout 2025 and hovered in the high 30s during the final quarter, signaling that most builders still view market conditions as poor.
Builders say demand remains constrained despite modest improvements in sentiment. About two-thirds reported offering incentives to entice buyers, underscoring the impact of elevated mortgage rates and stretched affordability.
“Market conditions remain challenging with two-thirds of builders reporting they are offering incentives to move buyers off the fence,” said NAHB Chairman Buddy Hughes. “Meanwhile, builders are contending with rising material and labor prices, as tariffs are having serious repercussions on construction costs.”
There were tentative signs of improvement in forward-looking indicators. Builders’ expectations for sales over the next six months held above the 50 threshold for a third consecutive month, reflecting optimism that easing monetary policy could begin to improve financing conditions in early 2026.
“In positive signs for the market, builders report that future sales expectations have been above the key breakeven level of 50 for the past three months,” said NAHB Chief Economist Robert Dietz. “However, builders continue to face supply-side headwinds, as regulatory costs and material prices remain stubbornly high. Rising inventory also has increased competition for newly built homes.”
Price cutting has become increasingly common as builders work to stimulate demand. Forty percent of respondents reported lowering prices in December, the second straight month at or above that level and the highest share since the early months of the pandemic in 2020. The average price reduction was 5%, down from 6% in November. Sales incentives were used by 67% of builders, the highest proportion recorded in the post-Covid period.
Among the index’s components, the gauge measuring current single-family sales rose one point to 42, while the measure of future sales increased one point to 52. Traffic of prospective buyers remained deeply subdued, unchanged at 26.
Regionally, confidence remained uneven. On a three-month moving average basis, builder sentiment slipped in the Northeast to 47, while the Midwest improved to 43. The South rose to 36 and the West climbed to 34, though both regions remain well below neutral levels.
Taken together, the data suggest that while builders see the potential for improvement ahead, the housing market remains constrained by affordability challenges, elevated costs and intensifying competition–leaving confidence fragile as the industry heads into 2026.
