Homebuilder sentiment drops, signaling softer new-construction demand for Home Depot

When builders are cutting prices and leaning harder on incentives, the first place Home Depot associates feel it is not on a housing chart but at the counter. Big-ticket kitchen, bath, flooring and appliance jobs tend to slow, while repair, maintenance and value-driven upgrades pick up the slack.

That shift is showing up in the latest confidence numbers. The National Association of Home Builders and Wells Fargo Housing Market Index fell to 35 in June, down two points from May and below 40 for the 14th straight month, the longest such stretch since the 2011-2012 foreclosure crisis. The index is built from current sales, expected sales over the next six months and buyer traffic, and June readings came in at 38 for current sales, 45 for expected sales and 25 for buyer traffic.

The pressure points are the same ones Home Depot associates hear about every day from pro customers and homeowners alike. Builders cited higher mortgage rates, elevated construction-material costs and stubborn affordability problems. To keep inventory moving, 35% of builders said they cut prices in June, up from 32% in May, while the average discount held at 6%. Sales incentives were used by 62% of builders, the 15th straight month at 60% or higher.

For the store floor, that usually means more comparison shopping and more questions about what can wait. Customers are less likely to walk in ready to green-light a full remodel, and more likely to ask whether a project can be broken into phases, whether a lower-cost substitute will work, or whether they should tackle one room at a time. That puts a premium on associates who can steer the sale toward the immediate fix, the right attachment, and the next step instead of forcing an all-or-nothing decision.

The weakness in new construction is also backed up by the government’s housing data. The U.S. Census Bureau said privately owned housing starts in May fell 15.4% from April to a seasonally adjusted annual rate of 1.177 million. Single-family starts slipped to 882,000, down 1.9% from April, while building permits eased 0.7% to 1.413 million.

Home Depot’s own results suggest demand has not collapsed, but it has become more selective. In the first quarter of fiscal 2026, the company reported sales of $41.8 billion, with comparable sales up 0.6% overall and 0.4% in the U.S. Ted Decker said underlying demand was similar to fiscal 2025 even as consumer uncertainty and housing affordability pressure remained elevated. Home Depot also reaffirmed fiscal 2026 guidance for sales growth of 2.5% to 4.5% and comparable sales growth of flat to 2.0%.

For associates and department leaders, the message is clear: if large remodels stay delayed, the win moves to repair, maintenance and smaller DIY projects that still keep traffic productive.