Four in 10 builders are cutting prices to boost demand, even as they face rising construction costs
Home builders are getting squeezed at both ends by a lack of demand from buyers and rising construction costs.
More home builders are cutting prices on new houses even as their construction costs increase, as buyers flee the housing market.
With buyer traffic to newly built homes at the lowest level since April 2012, excluding the onset of the pandemic, 43% of home builders are cutting prices in October. The share of builders offering discounts is the highest since 2020, according to a monthly survey by the National Association of Home Builders released Monday.
The average price cut was 6% for the seventh month in a row, and 65% of builders were also using incentives to boost sales, such as mortgage-rate buydowns, which involves offering a lower introductory rate for a fixed term when a buyer purchases a newly built home.
As both buying demand and supply costs increase, builders are feeling increasingly dismal about the housing market. Their confidence in the housing market this October fell to the lowest level since June 2012, the NAHB noted.
More builders are cutting prices even as rising construction costs make it more expensive to build. Builders are seeing elevated interest rates on construction loans, rising costs for building materials and diesel fuel, and persistent labor shortages related to immigration crackdowns, Bill Owens, chairman of the NAHB and a remodeler from Worthington, Ohio, said in a statement.
"Nationwide, more than one-third of builders reported immigration enforcement activity in their market areas during the past month, causing construction delays and discouraging legal workers from reporting to work," Owens added.
The gloomy builder outlook could be an opportunity for home buyers who can afford current home prices. The median price of a newly built single-family home in August was about $393,700, according to the U.S. Census Bureau. That's 10% cheaper, or nearly $40,000 less, than the median price of an existing single-family home, which was $433,600 in August, according to the National Association of Realtors.
"New homes are the overlooked opportunity more buyers should be thinking about," Kara Ng, a senior economist at Zillow (Z), said in a report. The company found that as of July 2026, the price per square foot for a newly built home was about $205 across the U.S., which was lower than the $212 price per square foot of an existing home.
That price gap was even wider in parts of the Sun Belt, where builders have been aggressively putting up new homes. In places such as Austin, Texas, and Raleigh, N.C., "buyers are in the best position to negotiate as sellers have a lot of other homes on the market to compete with," Ng added.
In Austin, a newly built home's price per square foot was nearly 20% less than that of an existing home, making for the deepest price difference across the 50 most populated U.S. metropolitan areas.
-Aarthi Swaminathan
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