Home builders saw a slight boost in confidence in March, but the new-home sector remains weighed down by affordability challenges and rising uncertainty as the first quarter of 2026 comes to a close.
The National Association of Home Builders released an update to its NAHB/Wells Fargo Housing Market Index (HMI) on Monday showing an increase of one point to 38, showing continued pessimism in the sector. The HMI separates majority-positive and majority-negative market sentiments, and has not crossed above 50 since April 2024.
The ray of hope may be attributed to the increased buyer traffic they observed, however, as that component index posted a three-point increase to 25. Home-purchase affordability barriers have been cited as consistently holding back any acceleration in home building activity to address a persistent supply shortage.
Builders’ reported use of sales incentives was 64% in March, one percentage point lower from February and completing a full year of exceeding 60% share on a monthly basis. The survey also revealed 37% of builders cut prices in March, compared to 36% in February and 40% at the end of last year.
On a slightly more positive note, six-month sales expectations rose two points to 49. Though still below the 50-point breakeven level, it mostly offsets a three-point decline in February. Slight improvement in current sales conditions was reported also, sending that component index higher by one point in March to land at 42.
Nevertheless, single-family residential construction activity and spending broadly contracted in 2025 amid a range of macroeconomic headwinds and cost constraints on affordable new-home production.
Now U.S. home builders — and the prospective buyers from whom they need more demand — must contend with a range of economic uncertainties stemming from the war with Iran started by the U.S. and Israel on Feb. 28. It has refueled fears of higher inflation to weakening labor markets and political gridlock.
Recently passed by the U.S. Senate with overwhelming bipartisan support, the 21st Century ROAD to Housing Act is one of the largest packages of housing-related legislation to move through Congress since the 1990s and is largely dedicated to facilitating growth in U.S. housing supply.
Now awaiting approval or reconciliation with the House of Representatives’ version, enthusiasm behind the bill has been tempered slightly by the inclusion of President Donald Trump’s proposed restrictions on single-family build-to-rent (BTR) investors.
A dozen prominent mortgage and housing trade groups provisionally pulled their support for the bill last week, including the NAHB, on account of the BTR restrictions. First mentioned last fall by Trump as a bid to improve affordability, housing economists widely agree that the BTR restrictions as written will likely harm affordability rather than help it.
In recent days, however, Trump has pulled his support for the housing bill until lawmakers pass a voter identity bill that survived the House on partisan lines but faces opposition in the Senate. Such delays to enacting reforms that would strengthen and boost markets compounds volatile market conditions, particularly as the world faces a prolonged global energy shock stemming from the war with Iran.
Consumers responded negatively to the start of the conflict, according to survey data recently published by the University of Michigan, which collected consumer input through March 9. Many U.S. economists say a prolonged closure of the Strait of Hormuz through which 20% of the world’s oil flows daily would raise costs significantly on a range of consumer goods impacted by spiking oil prices.
Renewed inflation fears have caused yields on 10-year U.S. Treasury bonds to rise sharply in the past two weeks, sending average mortgage rates back above 6.1% last week, according to Freddie Mac data. A sustained conflict that erodes affordability would only likely suppress homebuyer demand further, putting the spring and summer homebuying season — and builder permitting and starts activity — in jeopardy, for now.
