Homebuilders are slashing prices at the highest rate in 3 years

U.S. homebuilders are grappling with weakening buyer interest amid broader economic concerns, prompting them to slash prices at the fastest pace in three years, according to the latest monthly confidence survey from the National Association of Home Builders (NAHB).

In July, builder sentiment inched up by one point to 33 on the NAHB’s Housing Market Index, a modest improvement. However, readings below 50 still reflect pessimism. A year ago, the index stood at 41, and it has now remained in negative territory for 15 consecutive months.

This month’s slight uptick was attributed to the recently enacted federal budget deal, which delivered some tax relief for families, small businesses, and homebuilders. Still, mortgage rates have remained elevated and largely unchanged, continuing to weigh on affordability.

“While the new legislation may help jumpstart the economy after a sluggish spring, housing has struggled in 2025 due to worsening affordability, especially with high interest rates,” said NAHB chairman Buddy Hughes, a homebuilder based in Lexington, North Carolina.

That affordability strain is pushing builders to make concessions. In July, 38% of builders reported cutting home prices—the highest share since NAHB began tracking the trend in 2022. Back in April, that number was just 29%. The average discount remained at 5%, a level that’s held steady since last November.

To attract buyers, many builders have also been offering mortgage rate buydowns—paying to reduce interest rates on loans. While this strategy has helped stimulate demand somewhat, it hasn’t impacted profit margins as sharply as direct price reductions.

“If the larger homebuilders begin combining buydowns with steeper price cuts, it could significantly erode gross margins and earnings per share,” noted Jonathan Woloshin, a real estate and lodging strategist at UBS. “They likely wouldn’t recoup that loss through higher sales volume or operating efficiencies.”

Among the index’s three core components, the measure of current sales conditions rose one point to 36, and expectations for sales over the next six months climbed three points to 43. Meanwhile, the metric tracking prospective buyer traffic dipped by one point to 20—its lowest reading since late 2022.