U.S. homebuilder sentiment declined in September as higher mortgage rates weighed on sales conditions and buyer traffic. The National Association of Home Builders/Wells Fargo Housing Market Index fell three points to 32, while builders reported greater use of price reductions and sales incentives to support demand.
Key Takeaways
- The National Association of Home Builders/Wells Fargo Housing Market Index fell three points to 32 in September.
- The September reading was the lowest level recorded since September 2025.
- The current-sales component declined four points to 35, while future-sales expectations fell six points to 37.
- Buyer traffic remained weak, with the prospective-buyer traffic index unchanged at 23.
- Builders reporting price reductions increased to 38%, while 66% offered sales incentives.
U.S. Homebuilder Sentiment Falls to 12-Month Low
The National Association of Home Builders/Wells Fargo Housing Market Index fell to 32 in September from 35 in August, marking its lowest reading since September 2025. The index measures builder perceptions of the market for newly built single-family homes and combines assessments of current sales, expected sales and prospective-buyer traffic.
The September result was below the 34 reading economists had expected. The decline occurred as the 30-year fixed mortgage rate reached its highest level in more than a year, adding to the financing costs faced by prospective homebuyers.
The HMI is measured on a scale from 0 to 100. A reading above 50 indicates that more builders view sales conditions as good than poor, according to the National Association of Home Builders. The September reading therefore remained below that threshold.
Mortgage costs were a key factor in the September assessment. Freddie Mac data showed the average 30-year fixed mortgage rate at 6.76% during the previous week, up from 6.71% the week before.
The 10-year U.S. Treasury yield also reached 5.041% on Tuesday, its highest level since July 2007. Longer-term Treasury yields are closely watched in the mortgage market because they influence borrowing costs for longer-duration loans.
Recent coverage of U.S. mortgage rates near 7% also documented the increase in borrowing costs and its effect on housing affordability and sales activity.Â
September Builder Index Shows Weaker Sales Conditions
The HMI’s three components moved unevenly in September, with current and expected sales measures declining while the buyer-traffic measure remained unchanged.
The index measuring current sales conditions dropped four points to 35. The measure of sales expectations for the next six months fell six points to 37. The prospective-buyer traffic index remained at 23.
The September decline followed an August HMI reading of 35. At that time, the current-sales component stood at 39, future-sales expectations were 43 and prospective-buyer traffic was 23.
The National Association of Home Builders conducts the HMI as a monthly survey of single-family homebuilders. Respondents assess current sales of new single-family homes, sales expectations for the following six months and traffic from prospective buyers.
The index provides a measure of builder perceptions rather than a count of completed home sales or housing starts. Its components therefore capture how builders assess market conditions based on sales activity and buyer interest.
The September results also came after U.S. existing-home sales fell to a 14-month low in August. That decline added to the evidence of weaker transaction activity across the housing market during the period covered by the September builder survey.
Builder conditions are also being affected by construction expenses. A recent report on higher homebuilding material costs found that U.S. homebuilding costs increased by a median 6.7% over the preceding 12 months, with smaller builders reporting larger increases.
Buyer Traffic Remains Weak as Mortgage Rates Rise
Mortgage rates remained a direct factor affecting buyer activity in the September survey. The average 30-year fixed mortgage rate reached 6.76%, its highest level in more than a year, according to Freddie Mac data.
Higher mortgage rates increase the financing cost associated with a home purchase. The September builder survey showed the prospective-buyer traffic index holding at 23, indicating that builders continued to report weak traffic from potential buyers.
NAHB Chairman Bill Owens said buyer traffic had weakened across much of the country, citing rising mortgage rates as a major factor. He also pointed to higher material costs, increased gas and diesel prices and persistent labor shortages affecting builders.
The cost pressures extend beyond the buyer side of the transaction. Builders face expenses associated with materials, labor and construction activity while potential buyers face elevated financing costs. Those conditions affect the ability of builders to sell newly constructed homes at existing prices.
The September survey also came as builders faced higher costs for materials and labor. Smaller builders have reported particularly sharp increases in construction-material expenses, adding another cost consideration to new-home development.
The combination of financing and construction costs creates separate pressures for the new-home market. Builders must manage the cost of producing homes while buyers assess the cost of financing those homes.
The September survey therefore captured weaker assessments on both sides of the new-home transaction. Current sales and future sales expectations declined, while prospective-buyer traffic remained unchanged at 23.
Builders Increase Price Cuts and Sales Incentives
Builders responded to weaker sales conditions with greater use of price reductions and incentives. The share of builders reporting price cuts increased to 38% in September from 35% in August.
The average price reduction remained at 6% for the sixth consecutive month. The September figure indicates that the typical reduction reported by builders did not change even as a larger share of builders used price cuts.
Sales incentives also became more common. The share of builders offering incentives increased to 66% in September from 63% in August.
Price reductions and sales incentives give builders different ways to adjust the cost of a new home for buyers. A price reduction changes the listed or negotiated purchase price, while an incentive can provide another form of assistance associated with the transaction.
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The increased use of both measures came alongside the decline in the HMI’s current-sales and future-sales components. Builders were therefore reporting weaker sales conditions at the same time that more of them were using measures designed to support sales activity.
The September results also follow August data showing that 35% of builders had reduced prices and 63% were offering sales incentives. Those figures rose to 38% and 66%, respectively, in the September survey.
For buyers comparing newly built homes, builder incentives can form part of the overall transaction terms. The September HMI data does not measure the value of individual incentives, however, and the survey does not establish the financing terms available for specific properties.
New-Home Market Faces Continued Affordability Pressure
The September HMI results place mortgage costs, home prices and construction expenses alongside weaker buyer traffic and declining builder sales assessments.
Higher borrowing costs can affect a buyer’s ability to finance a home at a given purchase price. At the same time, builders continue to face expenses related to materials, labor, land and construction. The September survey captured these pressures through lower sales assessments and increased use of pricing measures.
The average 30-year mortgage rate of 6.76% was higher than the 6.71% recorded during the preceding week. The 10-year Treasury yield also reached 5.041%, adding to the financing conditions surrounding the housing market.
The builder survey’s future-sales index fell six points to 37, making it the largest decline among the three HMI components in September. The current-sales index fell four points to 35, while buyer traffic remained at 23.
The September figures also show that builders were adjusting their sales approach as conditions weakened. Price reductions were reported by 38% of builders, up from 35% in August, while 66% reported using sales incentives, compared with 63% previously.
Separate affordability data from the NAHB/Wells Fargo Cost of Housing Index found that a median-income U.S. family needed 34% of its income for the mortgage payment on a median-priced new home in the second quarter, up from 32% in the first quarter.
For the new-home construction market, those figures provide a snapshot of builder assessments and sales practices during a period of elevated mortgage rates. The HMI does not itself measure future construction volume, but weaker builder sentiment and increased sales incentives provide information about current market conditions reported by builders.
The September reading of 32 also places builder confidence below the 50-point threshold used by the National Association of Home Builders to distinguish between generally positive and negative assessments of market conditions.
Frequently Asked Questions
What is the U.S. homebuilder sentiment index?
The U.S. homebuilder sentiment index is measured through the National Association of Home Builders/Wells Fargo Housing Market Index. It surveys single-family builders about current sales, expected sales over the next six months and traffic from prospective buyers.
Why did U.S. homebuilder sentiment fall in September 2026?
The September decline coincided with higher mortgage rates, weaker buyer traffic and higher costs affecting builders. The average 30-year fixed mortgage rate reached 6.76%, while builders also reported higher material, labor, gas and diesel costs.
What was the September 2026 NAHB/Wells Fargo index reading?
The index fell three points to 32 in September from 35 in August. It was the lowest reading since September 2025.
How are mortgage rates affecting new-home demand?
Higher mortgage rates increase the financing cost of buying a home. In September, the HMI’s prospective-buyer traffic measure remained at 23 while the current-sales and future-sales measures declined.
How are builders responding to weaker buyer traffic?
More builders reported using price reductions and sales incentives in September. The share reporting price cuts rose to 38% from 35% in August, while the share offering sales incentives increased to 66% from 63%.
