U.S. housing market activity remains tepid and there was a marked increase in the use of price incentives by builders to attract homebuyers in August. The expectation continues to be that single-family housing starts will decline this year.

Elevated mortgage rates, weak buyer traffic and ongoing supply-side challenges continued to act as a drag on builder confidence in August, as sentiment levels remain in a holding pattern at a low level, the NAHB said.

Builder confidence in the market for newly built single-family homes was 32 in August, down from 33 in July. Sentiment has been stuck in negative territory for 16 straight months.

Affordability continues to be the top challenge for the housing market and buyers are waiting for mortgage rates to drop to move forward, the report said.

Thirty-seven percent of builders surveyed said they slashed prices in August. This compares with 38 percent in July and 37 percent in June.

The average price reduction was 5 percent in August, the same as every month since November 2024. The use of sales incentives was 66 percent, up from 62 percent in July and the highest share in the post-pandemic period.

The consensus forecast looks for no bounceback in gloomy homebuilder sentiment with the index flat at 33 in August from 33 in July.

The housing market index is a monthly composite that tracks home builder assessments of present and future sales as well as buyer traffic. The index is a weighted average of separate diffusion indexes: present sales of new homes, sales of new homes expected in the next six months, and traffic of prospective buyers of new homes.

This report provides a gauge of not only the demand for housing, but the economic momentum. People have to be feeling pretty comfortable and confident in their own financial position to buy a house. Furthermore, this narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. By tracking economic data such as the housing market index, investors can gain specific investment ideas as well as broad guidance for managing a portfolio. Whether the housing market index reflects new home sales or home resales, once a home is sold, it generates revenues for the realtor and the builder. It brings a myriad of consumption opportunities for the buyer. Refrigerators, washers, dryers and furniture are just a few items home buyers might purchase. The economic"ripple effect" can be substantial especially when you think a hundred thousand new households around the country are doing this every month. Since the economic backdrop is the most pervasive influence on financial markets, home sales have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the existing home sales data carry valuable clues for the stocks of home builders, mortgage lenders and home furnishings companies.