Homebuilder executives are maintaining a cautious outlook on the housing market, amid hot demand, shrinking profit margins and weak consumer sentiment. The ongoing conflict with Iran may further drive the builders’ outlook.
I National Association of Home Builders (NAHB)/Wells Fargo The Housing Market Index (HMI)’s builder confidence gauge’s remained low in March as it read 38. The gauge has been flat since October. The good news is that the index has moved significantly over the past few months with an average reading of 32 between June and September last year.
The HMI survey reveals that 37% of manufacturers reduced their prices in March, while 64% offered sales incentives, little changed from the previous month. Average price reductions remained steady at 6%, and March marked the 12th consecutive month with more than 60% of builders using incentives.
“Affordability for buyers and builders remains a major issue,” NAHB Chairman Bill Owens said in a statement. “Many buyers remain on the fence waiting for lower interest rates and economic uncertainty. Builders are facing higher land, labor and construction costs and nearly two-thirds continue to offer sales incentives to bolster the market.”
Where is demand headed?
During the exhibition of international builders in February, many insiders in the industry commented optimistically and frankly reported a small improvement in traffic and demand from mid-December to February that, in some cases, was more than could be expected from the usual change of season.
While this won’t necessarily translate into a significant increase in overall demand for 2026, these reports are consistent with what other public builders reported during earnings calls earlier this year. There is growing hope that, even if the housing market doesn’t rebound immediately, it may already be out.
Hovnanian Enterprisesfor example, it was reported during its Q1 2026 earnings that its sales pace in January and the first few weeks of February improved compared to last year. Toll Brothers it also reported a “slight” increase in traffic and deposits from the same period last year.
The ongoing war in Iran, however, adds a new layer of uncertainty, as the conflict threatens to introduce further supply disruptions and undermine consumer confidence during the spring sales season.
The closure of the Strait of Hormuz has pushed oil prices down to $100 per barrel, from around $65 per barrel before the conflict began.
The Trump administration is working on a plan to escort ships through the Strait of Hormuz, and UK Prime Minister Keir Starmer said at a press conference on Monday that Britain is working with partners on a plan to reopen the key shipping lane. However, there is no clear timeline for a decision.
The average 30-year mortgage has risen more than 6.0% since the start of the dispute, although rates have fallen slightly since last summer.
“While Freddie Mac’s 30-year fixed-rate mortgage fell to 6.05% in February, the lowest since August 2022, low-payment hurdles and uncertainty from conflicts with Iran and oil prices will be headwinds going forward,” NAHB Chief Economist Robert Dietz said in a statement.
Single-family homes continue to deteriorate
In accordance with US Census Bureau In data released last week, single-family home starts in January fell 2.8% to a seasonally adjusted annual average of 935,000, down 6.5% year over year. This comes after a 7.3% decline in single-family housing begins in 2025.
However, a strong performance in multifamily construction pushed all housing starts up 7.2% month-over-month in January. Construction starts with 5 or more units rose 29.1% to an annual average of 524,000 units.
Single-family home permits fell 11.6% year-over-year and 0.9% from last December, while multi-family building permits fell 13.4% month-over-month. According to Dietz, construction of single-family homes is expected to remain flat through 2026, before a predicted increase of 6% in 2027.
