U.S. home builder sentiment remained in deeply negative territory in August as the Iran war churned into its sixth month, maintaining pressure on the new-home sector.

The National Association of Home Builders (NAHB) and Wells Fargo’s Housing Market Index (HMI) showed a score of 35 in August, just one point above July levels and its 16th consecutive month below 40.

Measured on a scale of 0 to 100, the HMI divides majority positive and majority negative market sentiment at 50. The index has not crossed into majority positive territory since April 2024.

Nevertheless, the slight improvement in August was attributable to a two-point increase in the component index tracking current sales conditions, which rose to 39.

Indexes gauging six-month sales outlooks and prospective buyer traffic were unchanged over the month at 43 and 23, respectively.

“Builder sentiment remains muted from economic and geopolitical uncertainty, elevated mortgage rates and rising construction costs,” said Robert Dietz, chief economist of the NAHB, in commentary published Monday alongside the updated index.

Heavy reliance on sales incentives remained widespread, with 63% of NAHB survey respondents in August reporting their use, level with July. Slightly fewer builders reported using price cuts specifically, however, at 35% compared to 37% the previous month.

With sales of newly built homes down 5% year to date as of the end of June, according to government data, builders have relied on incentives like price reductions, mortgage rate buydowns and closing cost assistance to overcome slow buyer demand.

Midwest markets have been a bright spot for new-home sales, however, up 2.4% year to date halfway through 2026 compared to 5% declines across the Northeast and South and a more than 10% decline across the West.

Custom-home construction firms, as opposed to spec-home builders, have also proven more resilient this year, Dietz noted in his commentary. Custom builders typically serve the higher end of the market, reflecting a buyer segment that has continued to transact.

“Rising gas and diesel prices are pushing up material costs, and spec home building remains weak as many prospective buyers stay on the sidelines,” added Dietz, noting that “smaller, less dense markets” are outperforming larger metro areas.