Sixteen months is no longer a soft patch. It’s the operating environment.
The NAHB/Wells Fargo Housing Market Index rose one point to 35 in August, released the morning of August 17. That marks the 16th consecutive month the index has sat below 40, and the 16th straight month in which at least 30 percent of builders reported cutting prices to move product.
What moved and what didn’t
Current sales conditions rose two points to 39. Sales expectations for the next six months held steady at 43. Buyer traffic held at 23, which is the component that has barely moved all year and the one that matters most for 2027 starts.
Thirty-five percent of builders cut prices in August, down from 37 percent in July. The average price reduction held at 6 percent, and 63 percent of builders are still using sales incentives, also unchanged. So the discounting is marginally less widespread and exactly as deep.
Regionally, on three-month moving averages: Northeast down one to 44, Midwest flat at 45, South down two to 31, West unchanged at 27. The South is where the production volume is, and it’s falling.
The split inside the number
“August marked the 16th straight month that at least 30% of builders reported cutting prices to support demand, as well as the 16th consecutive month with the HMI below 40,” said Robert Dietz, NAHB’s chief economist. “Custom home builders continue to report stronger market conditions than spec builders… Smaller, less dense markets are also outperforming larger metropolitan areas, and smaller builders report relatively stronger conditions than larger builders.”
That’s three separate divergences running the same direction, and it’s the most useful thing in the release. Work is holding where the buyer is committed before the slab is poured and where land basis is low. It’s bleeding where a builder has to carry finished inventory in a large metro.
NAHB chairman Bill Owens also flagged rising gas and diesel prices pushing material costs higher, alongside continued spec weakness. He noted new home sales in the Midwest are up more than 2 percent so far in 2026, which is consistent with the regional table.
How to use it
Residential subs and suppliers should price 2027 pipeline for softness rather than a rate-cut rebound. Sixteen months of sub-40 sentiment with a third of builders discounting is not a market waiting on one catalyst.
The strategic read for anyone with capacity to redeploy is Dietz’s split. Custom, high-end and secondary-market work is where the volume holds, and adaptive reuse is absorbing some of the same trades. Conversions like the Jewelers Building repositioning in Chicago run heavy interior fit-out packages with residential-adjacent labor demand, and they’re underwritten on different economics than a spec subdivision.
One methodological caution. The HMI is a diffusion index built from a voluntary monthly survey of NAHB single-family members, not a census and not government data, and the release discloses no sample size or response rate. Regional figures are three-month moving averages, and the national index is seasonally adjusted with prior months subject to revision.