NAHB Index Drops to 32 Amid Labor and Cost Pressures
Builder confidence fell to its lowest level in three years as labor shortages and rising costs erode sales expectations.
The NAHB Housing Market Index fell to 32 in September. This marks the lowest reading in over three years. The index dropped three points from the previous month. It now matches the level recorded in September 2025.
Higher mortgage rates and rising construction costs drove the decline. Labor shortages continue to weigh on new home sales. These factors combined to push builder sentiment to a multi-year low.
Sales components show significant weakness
Current sales conditions fell four points to 35. Sales expectations dropped six points to 37. Prospective buyer traffic remained unchanged at 23. The decline in expectations signals growing pessimism for the near term.
NAHB Chairman Bill Owens cited rising mortgage rates as the primary cause of weak traffic. He also noted higher material costs and rising fuel prices. Persistent labor shortages remain a critical challenge for the industry.
Incentives rise as lot availability shrinks
More builders are offering price cuts to move inventory. The share reporting discounts rose to 38% from 35% in August. The average price reduction stayed at 6% for the sixth month in a row.
Sales incentives became more common among builders. 66% of firms reported using them, up from 63% previously. This is the highest share since December. Lot availability remains a major constraint on supply.
Regional performance varies across the country
The Northeast saw the largest drop, falling five points to 39. The Midwest declined one point to 44. The South dropped one point to 31.
The West was the only region to improve. Its index rose one point to 28. This regional divergence highlights uneven market conditions. Data from GN auto markets/housing: mortgage rates confirms the broadening pressure on builders.
