The housing market remains challenging for home builders, with housing sentiment dipping to one of its lowest readings since 2012 and housing starts falling to a five-year low.
Builders are increasingly leaning on incentives to help find the market as consumer confidence, mortgage rates, and general uncertainty is leaving buyers on the sideline.
The NAHB’s latest Housing Market Index (HMI) reflects the challenges facing builders. The overall HMI—tracking builder confidence in the single-family housing market—dipped to 32 in June, down two points from the previous month. The index has only posted a lower reading two times since 2012: December 2022 (31) and April 2020 (30) .
“Rising inventory levels and prospective home buyers who are on hold waiting for affordability conditions to improve are resulting in weakening price growth in most markets and generating price declines from resales in a growing number of markets,” says NAHB chief economist Robert Dietz. “Given current market conditions, NAHB is forecasting a decline in single-family starts for 2025.”
The NAHB forecast for single-family starts aligns with the latest data from the U.S. Department of Housing and Urban Development and U.S. Census Bureau. In May, the pace of home building fell to its lowest levels since May 2020 in the peak of the COVID-19 pandemic. In May 2025, housing starts fell 9.8% from the previous month to a seasonally adjusted annualized rate of 1.26 million. The pace represents a 4.6% decline from the same period a year ago. Building permits also fell 2% from the previous month to an annual rate of 1.39 million.
With fewer housing starts and more buyers on the sidelines, home builders are increasingly cutting prices or offering incentives to help find the market. The latest HMI survey indicated 37% of builders cut prices in June, the highest percentage since the NAHB began tracking this figure on a monthly basis in 2022. The share of builders using sales incentives was 62% in June, up one percentage point from May.
The HMI components tracking builder perception of future market conditions also paints a gloomy picture. The component measuring sales expectations in the next six months dropped two points to 40 while the gauge charting traffic of prospective buyers fell to 21—the lowest reading since November 2023.
