U.S. homebuilder confidence declined again in December, while attitudes in some parts of the country, particularly the Midwest, fared better.
This month, homebuilders reported a 39-point confidence level in new-home sales, according to the National Association of Home Builders/Wells Fargo Housing Market Index released Monday.
The index tracks builder confidence in current and future new-home sales. Any figure above 50 is regarded as positive, but this marks the 20th consecutive month of negativity. It's one point higher than November's reading.
“Market conditions remain challenging with two-thirds of builders reporting they are offering incentives to move buyers off the fence,” said NAHB Chairman and homebuilder Buddy Hughes in a statement. “Meanwhile, builders are contending with rising material and labor prices, as tariffs are having serious repercussions on construction costs.”
Amid the national negative viewpoint, homebuilders have the greatest level of confidence in the Midwest, according to the index. Sales sentiment in the Midwest was 47, while 41 in the Northeast, 36 in the West and 35 in the South.
Monthly Homes.com housing market data shows the Midwest has led in home price appreciation for the past six months. In November, Cleveland and Cincinnati ranked first and second, respectively, among metropolitan areas with the highest year-over-year growth in home prices.
St. Louis and Kansas City, Missouri, also broke into the top six. Amid affordability being the top concern for consumers, the Midwest offers cost relief, according to an NAHB analysis of federal data. The data found that in most of the Midwest, fewer than 20% of homeowners reported being cost-burdened or paying more than 30% of their income on housing.
The national survey also found 67% of homebuilders reported using sales incentives, the highest share in the post-pandemic period, according to the NAHB. The perks include lower-rate mortgages, free upgrades and closing cost credits to lure would-be buyers off the sidelines. Another 40% of builders also cut home prices — a five-year high — by an average of 5%.
The NAHB’s chief economist, Robert Dietz, previously told Homes.com this month that the trade group anticipates a modest 1% improvement in single-family housing starts next year.
The industry and buyers continue to point toward appreciating home prices, mortgage rates, interest rates and general economic and political uncertainty for a decline in buyer activity.
"It took the housing sector a decade to get into this situation; it will likely take a decade to get out," Dietz said.