Homebuilder Confidence Rises in May Despite Affordability Pressures — Evening Brief – 05.18.26

Homebuilder sentiment improved modestly in May, with the National Association of Home Builders/Wells Fargo Housing Market Index climbing three points to 37 from 34 in April, topping the consensus forecast of 34.

The gain offered a measure of encouragement for a housing market that has spent much of the past year navigating a difficult combination of elevated mortgage rates, persistently high construction costs, and cautious buyers. However, the reading’s underlying components make clear that the recovery remains tenuous and uneven.

All three sub-indices posted three-point gains. The index gauging current sales conditions rose to 40, the measure of future sales expectations climbed to 45, and the index tracking prospective buyer traffic increased to 25 — the last figure still reflecting a market where foot traffic remains historically subdued despite the modest improvement in sentiment.

The use of price reductions eased somewhat, with 32% of builders reporting cuts in May, down from 36% in April. However, the average size of those reductions increased to 6% from 5% the prior month, suggesting that where discounting is occurring, builders are cutting more deeply to move inventory. Sales incentive usage held nearly steady at 61%, up from 60% in April.

“Although some regional markets, including parts of the Midwest, are showing relative strength, the housing market continues to face significant affordability challenges,” said NAHB Chief Economist Robert Dietz.

On the policy front, NAHB Chairman Bill Owens pointed to potential legislative relief. “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,” he said.