NAHB Housing Market Index and Single Family Starts

This morning, the National Association of Home Builders (NAHB) released their monthly housing market index: Builder Sentiment Stays Weak as Affordability Concerns Persist

Economic uncertainty and persistent affordability challenges driven by rising material prices, high land costs, and elevated mortgage rates continue to weigh on builder sentiment.

Builder confidence in the market for newly built single-family homes fell two points to 34 in July, down from an upwardly revised reading of 36 in June, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. Sentiment has remained below 40 for 15 consecutive months, the longest such stretch since 2012.

“Many potential buyers remain on the sidelines as they wait for lower mortgage rates, more certainty on inflation and a clearer economic outlook,” said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio. “The recently enacted 21st Century ROAD to Housing Act contains important provisions on land-use and zoning, regulatory reform and financing tools that address obstacles facing builders and buyers, but these reforms will take time to implement.”

“With the HMI below 40 for 15 straight months, affordability remains the home building industry’s primary challenge, as elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages continue to affect the market,” said NAHB Chief Economist Robert Dietz. “Looking ahead, the newly enacted housing law is a positive step that will help expand housing supply and lower overall housing costs, although more policy change is needed at the state and local level.”

The latest HMI survey also revealed that 37% of builders cut prices in July, up from 35% in June and 32% in May. The average price reduction was 6% in July, the same rate as the previous month. The use of sales incentives was 63% in July, up slightly from 62% in June, and marking the 16th consecutive month this share has reached 60% or higher.
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All of the HMI sub-indices posted declines in July. The HMI index gauging current sales conditions fell one point to 37, the index measuring future sales dropped two points to 43 and the index charting traffic of prospective buyers posted a two-point decline to 23.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 45, the Midwest increased two points to 45, the South fell one point to 33 and the West dropped one point to 26.
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There are several negatives for new home builders now. The NAHB lists the following: “Economic uncertainty and persistent affordability challenges driven by rising material prices, high land costs, and elevated mortgage rates continue to weigh on builder sentiment.” This remains be a difficult period for homebuilders.

This first graph shows the NAHB index since 1985. This index has been below 40 for 15 consecutive months, and below 50 for 33 of last 35 months. Any number below 50 indicates that more builders view sales conditions as poor than good.

This was below the consensus forecast, but is well above the lows of the housing bust.

The following graph shows the NAHB HMI and single family starts since 1985.

When confidence declines, single family starts usually fall. And it appears we will see continued weakness in single family starts.

From the NAR: NAR Pending Home Sales Report Shows 5.4% Decrease in June

Month-Over-Month

• 5.4% decrease in pending home sales

• Declines in the Northeast, Midwest, South and West

Year-Over-Year

• 0.3% decrease in pending home sales

• Gains in the Northeast and Midwest; Declines in the South and West

Pending home sales for June are for closed sales in July and August. This was well below the consensus estimates for a 1% increase in this index, and this suggests further weakness in existing home sales.

From the MBA yesterday: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 10, 2026. Last week’s results included an adjustment for the Fourth of July holiday. …

The seasonally adjusted Purchase Index decreased 7 percent from one week earlier. The unadjusted Purchase Index increased 3 percent compared with the previous week and was 2 percent lower than the same week one year ago.

“Mortgage applications declined as the 30-year fixed rate increased to 6.65 percent, the highest level since August 2025. Purchase applications were down over the week and dipped below last year’s pace in the week following the July 4th holiday,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Despite higher mortgage rates, refinance applications increased, led by FHA and VA refinance applications rising 9 and 10 percent, respectively.”

There was a holiday adjustment, but this index remains weak.