Contractor confidence fell for the 2nd straight month in February according to the National Association of Home Builders (NAHB)/ Wells Fargo Housing Market Index (HMI). Price pressures and elevated building costs continued to obstruct already dismal sentiment.
While the relocation was modest in straight-out terms (just one point lower than before), it reinforces the wider malaise seen over the past several years.
The underlying elements were combined but leaned negative. The index determining present sales conditions held steady at 41, while the gauge tracking prospective purchaser traffic declined 2 points to 22, remaining strongly in “low to really low” territory. Most notably, future sales expectations dropped 3 points to 46, extending their relocation listed below the breakeven level of 50.
“Contractors reduced their expectations for future sales as buyers report cost obstacles, which is adding to decreasing consumer confidence for the general economy,” said NAHB Chairman Pal Hughes. He included that while many home builders continue to use buyer incentives– consisting of price decreases– numerous potential buyers remain on the sidelines. At the exact same time, renovation activity has stayed relatively resilient due to minimal family movement.
NAHB Chief Economist Robert Dietz noted that cost stays a main barrier early in 2026, arguing that significant improvement will require policies focused on flexing the construction cost curve and expanding achievable housing supply. On a more useful note, he pointed to reducing inflation as a possible pathway to lower rates of interest for both mortgages and builder funding.
Rates data revealed a slight pullback in discounting activity. In February, 36% of builders reported cutting rates, down from 40% in January and the most affordable share considering that last May. However, the typical cost decrease remained stable at 6%. The use of sales rewards held at 65%, marking the 11th consecutive month in which more than 60% of home builders reported offering concessions.
Regional three-month moving averages continue to reflect uneven conditions. The Northeast slipped one point to 43, the Midwest held steady at 43, the South edged down to 35, and the West decreased two indicate 33. In general, contractor sentiment stays constrained as affordability obstacles continue to temper need in the single-family market.