Home Builder Confidence Inches Up in December

Home builders less pessimistic

The lack of starter-level housing for sale is perhaps the biggest detriment to home buyers today.

That scarcity’s cascading effect drives up competition and then, prices. But could help be on the way?

A leading indicator of housing inventory bounced back for the third month in a row.

Home builder confidence up but remains low

Home builder sentiment ebbs and flows based on consumer demand, market conditions, shifting costs, and supply chain status.

Every month, the National Association of Home Builders (NAHB) and Wells Fargo survey NAHB members to measure this sentiment on a 0-100 scale in their Housing Market Index (HMI) report. The survey comprises three components for single-family housing: current home sales, home sales over the next six months, and traffic of prospective buyers.

In December, builder confidence rose to a score of 39 from 38 in November, while trailing the year-ago mark of 46.

“Market conditions remain challenging with two-thirds of builders reporting they are offering incentives to move buyers off the fence,” said Buddy Hughes, chairman at NAHB. “Meanwhile, builders are contending with rising material and labor prices, as tariffs are having serious repercussions on construction costs.”

The table below shows the HMI scores from the last 12 months:

The three index components experienced mild growth month-over-month. Current sales increased to 42 from 41, sales in the next six months rose to 52 from 51, and prospective home buyer traffic held at 26.

Broken down regionally, home builders in the Northeast had the most optimism with a three-month moving average score of 47. Next came HMIs of 43 in the Midwest, 36 in the South, and 34 in the West.

“In positive signs for the market, builders report that future sales expectations have been above the key breakeven level of 50 for the past three months and the recent easing of monetary policy should help builder loan conditions at the start of 2026,” said Robert Dietz, chief economist at NAHB. “However, builders continue to face supply-side headwinds, as regulatory costs and material prices remain stubbornly high. Rising inventory also has increased competition for newly built homes.”

What other indicators of housing inventory say

Realtor.com’s monthly housing market report showed active home listings increased 12.6% annually to a total of 1.07 million in November.

Among the 50 largest cities in the U.S., Charlotte, N.C., saw a 34.7% yearly jump in active listing count, trailed by 33% in Las Vegas, and 32% in Washington, D.C. On the flip side of the coin, Chicago, San Francisco, and Jacksonville, Fla., experienced annual declines of 1.5%, 0.9%, and 0.8%, respectively.

For a look ahead, the Census Bureau and Department of Housing and Urban Development put out a joint Monthly New Residential Construction Report.

Due to the government shutting itself down, the newest information isn’t available. September had the latest report release, covering August data. The three leading indicators of housing inventory were as follows:

First, building permits hit a seasonally adjusted annual rate (SAAR) of 1.312 million in August. That figure decreased 3.7% month-over-month and 11.1% year-over-year.

Next, housing starts reached a SAAR of 1.307 million, down 8.5% monthly and 6% annually. Lastly, a SAAR 1.608 million houses were completed in August, 8.4% higher than July but 8.4% below August 2024.

The bottom line for home buyers

Between low affordability and not enough listings, home buying has been a challenging venture for prospective borrowers.

If you’re a house hunter, it’ll be helpful to grab every advantage you can. Always be prepared so you can move fast, negotiate your mortgage rate to lower your payments, and see if you qualify for down payment and/or closing cost assistance.

If you’re ready to take the next step to homeownership, reach out to a local mortgage professional.