New Construction Homes: 43% of Builders Cut Prices as Confidence Hits 14-Year Low

Franklin, Tenn. — October 20, 2026

Buyers shopping for new construction homes are finding more builders willing to cut prices, as builder confidence fell in October to its lowest level since June 2012, according to the National Association of Home Builders.

The NAHB/Wells Fargo Housing Market Index fell three points to 29 in October, the trade group said Monday. Readings below 50 mean more builders view conditions as poor than good. Forty-three percent of builders surveyed said they cut prices in October, the highest share during the 2020-2026 period, and the average price cut held at 6% for the seventh consecutive month. Sixty-five percent reported using sales incentives, the 19th straight month that at least 60% of builders have done so.

Why are builders cutting prices on new construction homes?

Builders pointed to weaker demand and higher costs. All three components of the index declined in October: current sales conditions fell two points to 33, sales expectations for the next six months dropped five points to 32, and prospective buyer traffic fell five points to 18. NAHB said buyer traffic was at its lowest level since April 2012, excluding the onset of the pandemic in April 2020.

"Demand persists, but higher mortgage rates, elevated construction costs and weaker consumer confidence are keeping more buyers on the sidelines," NAHB Chief Economist Robert Dietz said in the release. NAHB Chairman Bill Owens cited higher gas prices and inflation weighing on buyer traffic, along with higher costs for construction loans, building materials and diesel, and said more than one-third of builders reported immigration enforcement activity in their market areas during the past month, causing construction delays.

Regionally, the three-month moving average for the South, which includes Tennessee, fell one point to 30. The Midwest fell three points to 40, the Northeast dropped one point to 38, and the West declined two points to 26.

How does the Middle Tennessee market compare?

The regional resale market has also shifted toward buyers. Across 10 Middle Tennessee counties, active inventory averaged 14,249 homes in September, up 8% from a year earlier, while new contracts fell 3% and listings took an average of 63 days to reach contract, according to Realtracs data compiled by Grant Hammond, a broker with Compass RE. Months of supply rose to 5.41 from 4.87 a year earlier, and the median sale price rose 2% to $444,169. The September figures were preliminary when published. Iron Hill Brief has reported on Nashville ranking second among big-metro buyer's markets.

How should buyers weigh builder incentives?

Incentives often come in forms other than a lower price, such as help with closing costs or a rate buydown, and loan programs cap how much a seller can contribute; Iron Hill Brief has explained how loan programs limit seller closing-cost credits.

Some builder incentives are tied to using a lender or title company the builder is affiliated with. Federal rules under the Real Estate Settlement Procedures Act allow such affiliated arrangements only if the buyer is given a written disclosure of the relationship and estimated charges and is not required to use the affiliated provider. Under the federal definition of required use, a discount or package offered for using particular services must be optional to the buyer and must be a true discount below prices otherwise available, not made up by higher costs elsewhere in the settlement process. In 2010, HUD noted consumer complaints that some builder incentives tied to affiliated lenders did not represent true discounts once total loan costs were counted.

That makes the full cost of the loan, not only the incentive, the figure to compare. Buyers can request Loan Estimates from more than one lender for the same home and compare total costs side by side, and can test how a price cut or credit changes their budget with the Iron Hill Mortgage affordability calculator.

Sources

• National Association of Home Builders, "Builder Sentiment Falls on Rising Rates," Oct. 19, 2026: https://www.nahb.org/news-and-economics/press-releases/2026/10/builder-sentiment-falls-on-rising-rates
• Grant Hammond, Compass RE, "Middle Tennessee Real Estate Market Update September 2026," Realtracs MLS data with Oct. 4 report date: https://www.granthammond.com/market-analysis/nashville-housing-market/middle-tennessee-real-estate-market-update-september-2026/
• Consumer Financial Protection Bureau, Regulation X, 12 CFR 1024.15, Affiliated business arrangements: https://www.consumerfinance.gov/rules-policy/regulations/1024/15
• Federal Register, "Real Estate Settlement Procedures Act (RESPA): Strengthening and Clarifying RESPA's 'Required Use' Prohibition," June 3, 2010: https://www.federalregister.gov/documents/2010/06/03/2010-13350/real-estate-settlement-procedures-act-respa-strengthening-and-clarifying-respas-required-use
• HUD, "HUD Solicits Public Comment on Referral Practices to Affiliated Businesses That May Violate RESPA," 2010: https://archives.hud.gov/news/2010/pr10-118.cfm