Ongoing challenges included elevated construction costs, economic uncertainty, and affordability issues that kept many prospective buyers on the sidelines. The slight improvement aligned with forecasts from economists.
"Market conditions remain challenging, with two-thirds of builders reporting they are offering incentives to move buyers off the fence," said NAHB chairman Buddy Hughes. "Meanwhile, builders are contending with rising material and labor prices, as tariffs are having serious repercussions on construction costs."
Higher expenses for imported materials such as timber, lumber, kitchen cabinets, and bathroom vanities contributed to cost pressures. Labor availability also faced constraints. Although mortgage rates had decreased notably from earlier highs during the year, softer employment conditions limited the positive impact.
Subdued demand resulted in growing inventories of completed but unsold homes, which discouraged new construction starts. Around 40% of builders lowered prices in December, marking the second consecutive month at this elevated level — the highest sustained share since May 2020. In November, the proportion stood at 41%, with an average reduction of 6%, compared to 5% in December.
The percentage of builders offering sales incentives rose to 67%, reaching the highest level observed since the pandemic period, up from a steady 65% maintained since September.
Among the index components, the measure of current sales conditions edged up to 42 from 41 in November. The indicator for expected sales over the next six months advanced to 52 from 51. Traffic of prospective buyers remained unchanged at 26.
The monthly survey, conducted among home builders, evaluates present sales, future sales expectations, and buyer interest to provide insight into trends within the single-family housing sector.
