Price Cuts on New Construction Mount as Homebuilder Sentiment Remains Low

The share of homebuilders offering price cuts on newly built homes reached a new five-year high in November, as builders grappled with headwinds from economic uncertainty.

This month, 41% of builders reported cutting prices, a record high in the post-Covid period, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Tuesday.

The average price reduction reported by builders was 6% in November, the same rate as the previous month. Meanwhile, 65% of builders reported using other sales incentives such as rate buydowns in November, tying the share in September and October.

Overall builder confidence in the market for newly built single-family homes remained low at 38 in November, up 1 point from the prior month. Any reading below 50 reflects negative sentiment about the market.

Homebuilders say that despite recent easing in mortgage rates, they are grappling with weak demand stemming from buyer uncertainty, exacerbated by the whirlwind economic impact of tariffs, inflation, and the recent government shutdown.

“While lower mortgage rates are a positive development for affordability conditions, many buyers remain hesitant because of the recent record-long government shutdown and concerns over job security and inflation,” says NAHB Chairman Buddy Hughes. “More builders are using incentives to get deals closed, including lowering prices, but many potential buyers still remain on the fence.”

Uncertainty has only been elevated by the lack of federal economic data since the government shutdown began Oct. 1.

Following the passage of a temporary spending bill last week that reopened the government, those reports are set to resume, although the release timeline for many key indicators is uncertain.

Thursday's release of the September jobs report will provide the first new clues about the labor market, which had softened over the summer, contributing to challenges for homebuilders.

“We continue to see demand-side weakness as a softening labor market and stretched consumer finances are contributing to a difficult sales environment,” says NAHB Chief Economist Robert Dietz.

Single-family housing starts, which had been expected to rise slightly in 2025, are now estimated to come in below last year's figure of 1 million.

Dietz says that NAHB is forecasting a slight gain in single-family starts in 2026 as builders continue to report marginally positive expectations about future sales conditions.

Private sector flashes mixed signals on housing

With federal data on new-home sales and construction since August still in limbo, data from the private sector provides some mixed signals about conditions for homebuilders.

The Mortgage Bankers Association estimates that new single-family home sales surged to 771,000 in October at a seasonally adjusted annual rate.

The estimate, based on mortgage applications for new home purchases in the MBA's builder application survey, showed new home sales at their strongest pace in more than a year.

“Lower mortgage rates, ongoing usage of builder concessions, and growing levels of for-sale inventory drove an increase in new home sales for October,” says MBA Vice President and Deputy Chief Economist Joel Kan.

The estimate suggests that new-home sales remained robust during the government shutdown, as lower mortgage rates lured prospective buyers off the sidelines.

However, Home Depot's quarterly earnings report on Tuesday flashed warning signs for the housing market, with the bellwether company reporting stagnant sales and cutting its profit forecast for the year.

"We believe that consumer uncertainty and continued pressure in housing are disproportionately impacting home improvement demand,” says Home Depot CEO Ted Decke.