MW Home builders lose confidence, resort to price cuts as buyers steer clear of housing market

By Aarthi Swaminathan

Share of builders slashing prices on newly built homes reaches a three-year high, industry group says

The numbers: Home-builder confidence sank to a two-year low as buyers continue to shun the housing market. Builders are upping price cuts in an effort to bring them back.

Builder sentiment around the housing market fell significantly in June as buyers generally continued to shy away from purchasing homes in a high-interest-rate environment. Home prices also remain elevated, making homeownership an unaffordable prospect. Economic uncertainty also continues to weigh on home buyers.

The National Association of Home Builders' monthly confidence index fell to 32 in June, a drop of 2 points, the industry group said on Tuesday. A year ago, the index stood at 43. The June reading was the lowest since December 2022.

Big picture: It's not just builders. Homeowners selling their properties are also having a hard time in the current environment in which demand for homes remains depressed. As housing inventory builds up, sellers across the country are cutting prices to entice buyers, leading some to argue that the housing market has become more buyer-friendly.

Read more: Home sellers face an 'absolutely brutal' market that's tilting in buyers' favor

As inventory levels rise and buyers hold back, waiting for mortgage rates to drop or home prices to go down, the housing market is seeing "weakening price growth in most markets and generating price declines for resales in a growing number of markets," Robert Dietz, chief economist at the NAHB, said in a statement. The NAHB expects builders to pull back the pace of constructing new homes, referred to as housing starts, in 2025.

Key details: Builders have been pulling the price-cut lever for some time now but are escalating that tactic as competition intensifies. In June, 37% of builders cut home prices, which was the highest share since the NAHB began tracking the figure in 2022. The average price reduction was 5% in June, unchanged from the previous month.

More builders were also offering other types of discounts. The use of sales incentives was 62%, up from last month's 61%. These include mortgage-rate buydowns, where the builder offers a lower interest rate to the buyer for a set period before it adjusts upwards.

These incentives have paid off for some builders: In its second-quarter earnings report on Monday, Lennar $(LEN)$ reported that its price-cut and incentive strategy helped boost sales.

"Reflecting softer market conditions, our average sales price, net of incentives, declined to $389,000," Stuart Miller, executive chair and co-chief executive of Lennar, said in a statement. "As mortgage interest rates remained higher and consumer confidence continued to weaken, we drove volume with starts while incentivizing sales to enable affordability and help consumers to purchase homes."

Read more: Home prices in the biggest 20 markets decline for the first time in over two years. Here's where they're expected to fall the most.

The three gauges that underpin the overall builder-confidence index were down:

-- Builders were more downbeat about current sales conditions. The gauge fell 2 points.

-- Builders do not expect an uptick in traffic from prospective buyers. The gauge fell by 2 points.

-- They were more pessimistic about sales expectations in the next six months. The gauge fell 2 points.

-Aarthi Swaminathan

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June 17, 2025 10:00 ET (14:00 GMT)

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