Last month, the National Association of Home Builders (NAHB) announced that builder confidence posted a modest gain in May, even as buyers grapple with rising mortgage rates and economic uncertainty. The information comes from the NAHB/Wells Fargo Housing Market Index (HMI).
Builder confidence in the market for newly built single-family homes increased three points to 37 in May. Meanwhile, the association reports that builders continue to contend with elevated land, labor and construction costs.
“The housing market remains soft as higher mortgage rates, rising gas prices and economic uncertainty related to the war in Iran continue to dampen buyer demand,” said NAHB chairman Bill Owens, a home builder and remodeler from Worthington, Ohio. “However, efforts in the House to modify the 21st Century ROAD to Housing Act could increase the nation’s housing supply and help ease builder concerns.”
The latest HMI survey also revealed that 32% of builders cut prices in May, down from 36% in April. The average price reduction was 6%, up from the 5% figure in April. The use of sales incentives was 61% in May, up slightly from 60% in April, and marking the 14th consecutive month this share has reached 60% or higher.
“Recent increases for long-term interest rates will continue to hold back home buyer demand,” said NAHB chief economist Robert Dietz. “Although some regional markets, including parts of the Midwest, are showing relative strength, the housing market continues to face significant affordability challenges.”
All three of the major HMI indices posted gains in May, as some buyers who had been holding back decided to move forward this spring, NAHB officials said. The HMI index gauging current sales conditions rose three points to 40 from April to May, while the index measuring future sales increased three points to 45 and the index charting traffic of prospective buyers posted a three-point gain to 25.
Labor costs are a factor for builders but NAHB points to data from the U.S. Bureau of Labor Statistics (BLS) indicating that residential building workers’ wage growth remained subdued in the first quarter of 2026. Both nominal and inflation-adjusted wage gains remained calm, the latest reports show and the number of unfilled construction sector jobs has continued to trend downward, reflective of the weaker housing demand and slowed construction hiring, NAHB officials explained.
The association pulled out important numbers: average hourly earnings for residential building workers increased 2.1% year over year in March, down from the 9.4% peak in mid-2024 and accounting for inflation, real wages declined 1.2% year over year in March. Yet wages were 8.4% higher than the manufacturing sector ($36.54 per hour), 22.4% higher than the transportation and warehousing sector ($32.34 per hour), and 3.6% lower than the mining and logging sector ($41.10 per hour).