New York- USA – August 19, 2025 – 

In a clear sign of the ongoing struggle within the housing sector, a new report shows that home builders’ confidence has fallen to a new low, with the industry now relying on buyer incentives at a five-year high. The data, released by the National Association of Home Builders (NAHB), paints a picture of a market grappling with affordability issues, stubbornly high mortgage rates, and a slowdown in buyer traffic. This trend of falling confidence and rising incentives marks a significant shift from the frenzied post-pandemic market, and is a strong indicator that the housing industry is now firmly in a “buyer’s market.”

Headline Points:

 * Confidence at a Low: The NAHB/Wells Fargo Housing Market Index (HMI) for August dipped to 32, marking the 16th consecutive month of negative sentiment and tying for the lowest reading since December 2022.

 * Incentives Hit a High: A record 66% of home builders are now offering sales incentives, such as mortgage rate buydowns and closing cost assistance, the highest percentage recorded in the post-Covid period.

 * Affordability remains a Major Hurdle: Persistently high mortgage rates, coupled with elevated home prices, continue to be the main driver of weak buyer demand.

 * The Price Cut Dilemma: While the percentage of builders cutting prices has slightly decreased, the average price reduction remains at 5%, a tactic that builders have been using for months to attract buyers.

A Market Stuck in “Low Gear”

For months, the housing market has been described as being in a state of suspended animation, and the latest report from the NAHB confirms that this stagnation is taking its toll on the builders themselves. The August HMI reading of 32 shows a marginal decline from the previous month and underscores the deep-seated challenges facing the industry. A reading below 50 indicates that more builders view market conditions as “poor” rather than “good,” and the current figure suggests a widespread pessimism among those who build new homes.

The primary culprit, as noted by NAHB Chief Economist Robert Dietz, remains affordability. “Affordability continues to be the top challenge for the housing market and buyers are waiting for mortgage rates to drop to move forward,” he stated in a press release. With mortgage rates hovering in the high-6% range, the dream of homeownership remains financially out of reach for a significant portion of potential buyers.

In a desperate bid to lure these reluctant buyers back into the market, builders are pulling out all the stops. The survey found that a staggering 66% of builders are now offering sales incentives—the highest level in five years. These incentives go beyond simple price cuts and often include valuable concessions like “mortgage rate buydowns” which temporarily lower a buyer’s interest rate, making their initial monthly payments more manageable. Other incentives include credits toward design options or assistance with closing costs.

While the use of these incentives is at a record high, the share of builders cutting prices outright has remained relatively stable at 37%. This suggests that builders are increasingly favoring incentives over blunt price reductions in an attempt to protect their profit margins. However, the average price reduction for a home that does see a cut remains at 5%, a consistent figure since November.

The softening market has also had a ripple effect on the construction labor market. A recent report from the U.S. Bureau of Labor Statistics showed that wage growth for residential building workers has slowed, reflecting the decline in construction activity and labor demand. This broader cooling in the sector is a direct result of the weak demand for new homes, as builders slow the pace of new construction to avoid a glut of unsold inventory.

Looking ahead, the market is expected to remain challenging. While some of the supply-side issues that plagued builders in recent years have eased, the fundamental problem of affordability persists. Unless mortgage rates see a significant and sustained decline, the housing market will likely remain in this state of subdued confidence and elevated incentives. For prospective homebuyers, this shift means there are deals to be found, as builders are now more willing to negotiate on price and offer substantial concessions to get a sale across the finish line.