Builder sentiment took a meaningful step backward in September, with higher mortgage rates, rising construction costs and worsening labor shortages weighing on the market for newly built homes. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) fell three points to 32, matching September 2025 as the lowest level in over 3 years. 

Breakdown of various component indices:

“Buyer traffic has weakened across much of the country, largely because of rising mortgage rates,” said NAHB Chairman Bill Owens. Owens also pointed to higher material costs, rising gas and diesel prices and persistent labor shortages as ongoing challenges for builders.

NAHB Chief Economist Robert Dietz added that builders also reported difficulty finding available lots, with 42% rating current lot availability as poor and another 38% rating it as fair.

Builders increased their use of pricing incentives in September. The share reporting price cuts rose to 38% from 35% in August, while the average price reduction remained at 6% for the sixth consecutive month. Sales incentives were also more common, with 66% of builders reporting their use, up from 63% in August and the highest share since December.