Con Dig (19-May-26) Builder confidence in the US single-family housing market posted a modest improvement in May, though elevated mortgage rates, economic uncertainty, and affordability challenges continue to weigh on buyer demand and overall market sentiment.

The latest Housing Market Index (HMI) from the National Association of Home Builders and Wells Fargo showed builder confidence rising three points to 37 in May.

While the gain suggests some stabilization in the housing market following a sluggish start to the year, the index remains well below the neutral threshold of 50, indicating that more builders still view market conditions as poor rather than good.

“The housing market remains soft as higher mortgage rates, rising gas prices and economic uncertainty related to the war in Iran continue to dampen buyer demand,” Bill Owens, chairman of the NAHB, said in a statement.

Mortgage rates and affordability continue to pressure demand

The report highlights the ongoing affordability challenges facing the US housing sector, with elevated financing costs continuing to sideline prospective buyers.

“Recent increases for long-term interest rates will continue to hold back home buyer demand,” said Robert Dietz. “Although some regional markets, including parts of the Midwest, are showing relative strength, the housing market continues to face significant affordability challenges.”

Builders also continue to grapple with elevated land, labor, and construction costs, which have limited their ability to significantly reduce home prices despite softer demand conditions.

Still, the latest survey suggests some buyers who had delayed purchases earlier in the year moved forward during the spring selling season, contributing to improved sales expectations.

The HMI index measuring current sales conditions rose three points to 40, while the component tracking sales expectations for the next six months increased to 45. Buyer traffic, however, remained subdued, despite improving three points to 25.

Builders continue using incentives to attract buyers

The survey also showed builders continuing to rely heavily on incentives to maintain sales momentum.

Roughly 32% of builders reported cutting home prices in May, down slightly from 36% in April. However, the average price reduction increased to 6% from 5% the previous month.

Meanwhile, 61% of builders reported using sales incentives, marking the 14th consecutive month in which at least 60% of builders have used incentives to support transactions.

The persistence of incentives underscores the pressure builders remain under as affordability constraints continue to limit buyer activity.

Regional trends remain uneven

Regional performance continued to vary across the country.

Using three-month moving averages, the Midwest posted the strongest reading with a one-point increase to 43, while the Northeast rose to 42. The South remained flat at 35, and the West weakened slightly to 28.

The stronger Midwest performance reflects relatively better affordability conditions compared to higher-cost regions, particularly parts of the West where elevated home prices and financing costs continue to weigh heavily on demand.

Policy and market outlook

The NAHB also pointed to ongoing policy discussions in Washington as a potential source of support for future housing supply.

According to Owens, efforts in the House to modify the 21st Century ROAD to Housing Act could help ease supply constraints and improve builder confidence over time.

Still, broader uncertainty surrounding interest rates, geopolitical tensions, and construction costs is expected to continue shaping the housing market through the remainder of 2026.

For builders, the latest data suggests conditions may be stabilizing, but the sector remains firmly in a slow-growth environment where affordability—and access to financing—continues to dictate market momentum.