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Homebuilder Sentiment Plunges to 2-Year Low Amid Economic Uncertainty
18 Aug
Summary
- U.S. homebuilder sentiment fell unexpectedly in August to its lowest level since December 2022
- Over a third of builders cut prices, and two-thirds offered incentives to attract buyers
- Affordability and supply-side challenges continue to weigh on the housing market
According to the latest data, the U.S. housing market is facing significant challenges as of August 2025. A gauge of homebuilder sentiment fell unexpectedly last month, slipping back to its lowest level in more than two-and-a-half years.
The National Association of Home Builders/Wells Fargo Housing Market Index dropped to 32, matching the lowest reading since December 2022, down from 33 in July. This unexpected decline came as more than a third of residential construction firms cut prices, by an average of 5%, and roughly two-thirds of them offered some form of incentive to lure buyers sidelined by still-high mortgage rates and economic uncertainty.
NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, North Carolina, noted that "Affordability continues to be the top challenge for the housing market, and buyers are waiting for mortgage rates to drop to move forward." Builders are also grappling with supply-side headwinds, including ongoing frustrations with regulatory policies connected to developing land and building homes.
While mortgage interest rates have shown recent signs of easing, with the average rate on a 30-year fixed-rate mortgage slipping to 6.58% last week, the lowest level since October 2024, the housing market remains depressed. Economists polled by Reuters see little prospect for improvement in July's data on new home construction and building permits, both of which remain at low levels.
