July 16, 2026

Homebuilder confidence fell 2 points in July to 34 after declining 1 point in May.  Builders are still worried about the rising cost of materials, high mortgage rates, and affordability.  The breakeven point for this series is 50 so at 34 it is clear that builders are being very cautious.

NAHB Chairman Bill Owens a home builder  and remodeler  from Worthington, Ohio said, “Many potential buyers remain on the sidelines as they wait for lower mortgage rates, more certainty on inflation and a clearer economic outlook.  The recently enacted 21st Century ROAD to Housing Act contains important provisions on land-use and zoning, regulatory reform and financing tools that address obstacles facing builders and buyers, but these reforms will take time to implement.”

Chief Economist Robert Dietz said,, “With the HMI below 40 for 15 straight months, affordability remains the home building industry’s primary challenge, as elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages continue to affect the market.  Looking ahead, the newly enacted housing law is a positive step that will help expand housing supply and lower overall housing costs, although more policy change is needed at the state and local level.”

The survey also found that 37% of builders reported cutting prices in July, up from 35% in June.  The average price reduction was 6% which is about the same as in other recent months.  The use of sales incentives was 63% in July up slightly from 62% in June.

Traffic through the model homes fell 2 points in July to 23 after having been unchanged in June.  Traffic through model homes remains low as still high mortgage rates have reduced the number of interested buyers.  .

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The homebuilders expectations index fell 2 points in July to 43 after having been unchanged in June.  Builders remain concerned about both their cost of materials, high mortgage rates, and the willingness of their potential buyers to buy given the uncertainty that exists today.

The decline in the 30-year mortgage rate earlier in the year provided a spark of optimism for the first time in a while, but rates have since rebounded to 6.5%.  Given the recent drop in oil prices mortgage rates should fall as the year progresses and the inflation rate should slow in the second half of the year.   We expect mortgage rates to edge lower to 6.2% by the end of 2026.

Home prices have risen 1.2% in the past year.  The shortfall of homes available for sale is preventing prices from falling rapidly. Home prices should be about unchanged for 2026 as a whole.

If mortgage rates drop a bit, home prices are steady and the economy continues to crank out jobs, wages will rise and housing affordability should increase somewhat in 2026 to the point where a potential buyer has 17% more income than required to purchase a median-priced home.

We expect 1.8% growth in the second quarter and 2.2% growth for the year as a whole.

Stephen Slifer

NumberNomics

Charleston, SC