In December 2025, U.S. homebuilder sentiment reached an eight-month high, with the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) rising to 39, the highest since April. Despite this increase, the index remains below the neutral threshold of 50 for the 20th consecutive month, indicating ongoing challenges in the housing market.
Homebuilders continue to grapple with rising construction costs, which are primarily driven by tariffs on imported materials like lumber and cabinetry. Labor shortages, further intensified by strict immigration policies, have also strained the industry. Although there has been a decline in mortgage rates, weak demand stemming from affordability issues and a sluggish job market has resulted in higher inventories of unsold homes.
To drive sales, a record 67% of builders are offering incentives, the highest level since the pandemic began. Additionally, around 40% of builders reported price cuts in December, averaging a 5% reduction. Sub-measures from the index showed modest improvements in both current and expected sales, yet traffic from potential buyers remained stagnant, reflecting persistent market uncertainty and cautious consumer behavior.
Overall, the December increase in builder sentiment reflects cautious optimism among homebuilders. However, they remain alert to the ongoing challenges that impede recovery in the housing market, including rising costs and affordability issues that continue to impact demand.
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