Homebuilders nationally remain pessimistic about new home demand, and more are cutting prices in response, citing high mortgage rates and affordability concerns.
Due to better construction weather and housing market activity, July readings throughout the National Association of Home Builders/Wells Fargo Housing Market Index’s history are typically positive. Sentiment this year, however, has taken a negative turn. There hasn’t been a July reading in the 30s since 2012, when the industry was still recovering from the Great Recession.
But a new federal tax and spending bill offers some positivity, according to the NAHB trade group. Homebuilder sentiment regarding new single-family home sales increased by 1 point in July to 33, the index shows. Any reading below 50 is reported as negative.
This marks the 15th consecutive month of negative readings. The national monthly survey combines builder outlooks on current and future sales of new homes, and the index last recorded 33 in November 2022.
Law seeks to boost affordability
The NAHB cited President Donald Trump’s "One Big, Beautiful Bill Act" as the reason for the slight increase in confidence.
The legislation, signed into law on July 4, covers many business sectors, but its housing focus seeks to decrease taxes paid by homeowners and create incentives for new multifamily construction in specific areas.
“The passage of the One Big Beautiful Bill Act provided a number of important wins for households, home builders and small businesses,” NAHB Chairman Buddy Hughes said in a statement. “While this new law should provide economic momentum after a disappointing spring, the housing sector has weakened in 2025 due to poor affordability conditions, particularly from elevated interest rates.”
Separately from the bill, homebuilder Jason Hughes, owner of T.R. Hughes Homes in St. Charles, Missouri, noted a recent pickup in demand.
“Builders I talk to [are] all saying the same thing: slow start but on pace to do at least what we did last year, hoping we beat it,” Hughes said in an interview.
Dropping home prices
The index found 38% of surveyed builders cut home prices in response to softened demand, up 1% from June, which posted the highest monthly increase in builders cutting prices in about two and a half years. These discounts average 5%, and for a $400,000 home, that would be $20,000 off.
It’s a telling stat for the drop in demand for builders in recent months. In April, the share of builders cutting prices was 29%. On top of price cuts, the majority of builders continue offering incentives that can lower mortgage rates or cover closing costs, for example.
Large national builders such as Lennar and KB Home have reported decreasing prices to lure in affordability-constrained buyers and in underperforming markets. Lennar's average sales prices declined by 9% year-over-year in the second quarter, including incentives.
Mortgage rates blamed
Affordability remains the topic of conversation in the homebuilder industry, with the average 30-year fixed mortgage rate hovering under 7%. It’s been an ongoing challenge for buyers who witnessed 3% rates between 2020 and 2022, in addition to construction costs rising.
The median price of a new single-family home is $416,900, according to the NAHB. Homes.com data shows that a 6.72% rate for a $400,000 home results in a $2,586 monthly payment, while a 3.03% rate creates a $1,693 monthly payment.
Meanwhile, permits that show the volume of homes to soon be constructed declined 6.1% in May compared to the prior year. April permits dropped 4.7% annually, and the dip was 3.8% in March.
“Single-family housing starts will post a decline in 2025 due to ongoing housing affordability challenges,” said NAHB Chief Economist Robert Dietz in a statement.