Homebuilder sentiment slipped for a second straight month in February as builders cited persistent affordability pressures, including high house price-to-income ratios, mortgage rates above six percent, and elevated land and construction costs.
The National Association of Home Builders/Wells Fargo Housing Market Index fell one point to 36 in February, the lowest level since September. Readings below 50 indicate more builders view conditions as poor than good.
Builders’ assessment of current sales conditions was unchanged, but expectations weakened. The index for current sales held at 41, while the gauge of sales expectations for the next six months fell three points to 46. Traffic of prospective buyers declined two points to 22.
NAHB Chairman Buddy Hughes said buyers are reporting affordability challenges and many remain on the sidelines even as most builders continue to use incentives, including price cuts. He added that remodeling demand has stayed solid amid limited household mobility.
The share of builders reporting price cuts fell to 36 percent in February from 40 percent in January, NAHB said, while the average price reduction held steady at 6 percent. The use of sales incentives was unchanged at 65 percent, extending an 11-month stretch in which more than 60 percent of builders reported offering incentives.
NAHB Chief Economist Robert Dietz said housing affordability remains a challenge at the start of 2026 and argued that the way forward is policy aimed at lowering construction costs. “The solution for the housing market is the enactment of policies that will bend the construction cost curve and enable additional supply of attainable housing,” Dietz said in the group’s release.
Dietz said that further progress on inflation would help bring down interest rates. The Fed cut three times last year but has signaled a pause this year. Fed officials have indicated they may cut only once or twice this year—and that it is likely those cuts will not come until the second half of 2026. Mortgage rates, which fell from seven percent in January of 2025 to near six percent more recently, are no longer falling.
Builders’ affordability concerns come as the Federal Reserve has stepped back from further near-term easing after cutting rates late last year. The central bank held its benchmark rate steady at 3.50 percent to 3.75 percent at its Jan. 28 meeting, after December projections signaled a slower pace of cuts ahead.
Regionally, the three-month moving average of builder sentiment slipped in most parts of the country. The Northeast fell one point to 43, the Midwest held at 43, the South edged down one point to 35, and the West dropped two points to 33.
NAHB said the March HMI is scheduled for release on March 16.
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