January 26, 2026 – Latest housing market news from last week brings a mix of cautious progress and persistent challenges across housing and construction. Builder sentiment softened amid affordability and cost pressures, while construction spending showed a modest rebound despite uneven year over year trends. California’s home insurance market is providing early indications of what premiums could look like in 2026 through new rate approvals, and easing policy uncertainty paired with solid late-2025 home sales offers some underlying momentum as the year begins.

Builder confidence kicks off the year with a soft note: U.S. homebuilder sentiment eased at the start of 2026 after climbing three straight months at the end of 2025, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released last week. The latest HMI dropped back down to 37 in January and posted the lowest level since October, as low housing affordability and rising construction costs continue to hamper building activity. Survey results indicate that builders’ sales expectations in the next six months moved down to 49, reaching the lowest level in four months. The survey’s index on traffic of prospective buyers also deteriorated with a three-point dip to 23, the lowest since September. The latest HMI survey also revealed that 40% of builders cut prices in January, the third consecutive month that the share has been at that level or higher. Two-thirds of the respondents (65%) used sales incentives in January in the hopes of pushing demand up, and it was the 10^th straight month that the share exceeded 60%. With most responses collected before January 9^th, the announcement that the GSE’s would purchase $200 billion mortgage-backed securities to lower rates and the effect of the Greenland tariffs only had limited impact on the survey results. Nevertheless, challenges remain in the market as the supply-side cost factors and policy uncertainty continue to create headwinds for builders in the foreseeable future.

Construction spending rebounds after modest decline in September: U.S. construction spending recovered some ground in October after dipping moderately in the prior month, the latest Commerce Department’s report shows. Total outlays rose 0.5% month-over-month at the start of Q4 2025 but were down 1.0% year-over-year from October 2024. Total private construction was the primary contributor to the yearly drop, registering a decline of 1.9% from the same month of last year. Private residential construction spending increased 1.3% from September but recorded a 1.3% decline from the same month of last year. Both single-family (-6.1%) and multifamily (-2.8%) remained on a declining trend from their year-ago levels, with builders scaling back more substantially on single-family spending while the pullback on multifamily construction appeared to be flattening out. With interest rates showing more fluctuations in recent weeks and harsh weather hitting many parts of the U.S, building activity will likely slow at the start of the year and construction spending may show weaknesses in the near term.

Two of California’s largest homeowner insurance providers receive approval to raise rates: Mercury and CSAA, the AAA-affiliated insurer for northern and central California, received approval to raise rates in 2026, according to filings with the California Department of Insurance. Both home insurers will each raise rates for customers by an average of 6.9% later this year. Mercury, the third largest homeowner insurance provider in California, will start increasing premiums for more than 650,000 customers in July, and CSAA will begin their implementation for nearly 481,800 homeowners on March 15. The exact amount change will depend on the location of the property and other risk factors. According to the filings, Mercury’s rate changes could range from a 10% decrease to a 60% increase, and CSAA’s rate changes could vary between 0% to 10% increase. Both rate filings were approved at the end of 2025, and they were the first to be approved under the Sustainable Insurance Strategy, the reforms aimed at improving California’s insurance crisis. As part of their filings, Mercury committed to writing at least 2,000 policies by July 2028 in parts of California where the Department of Insurance designated as “distressed” and CSAA planned to offer quotes to about 1,000 current FAIR Plan policy holders that meet its underwriting criteria. The expansion should improve coverage access, but rising premiums will have a negative effect on affordability on homeownership.

Greenland tariffs canceled as framework reached with NATO: President Trump called off Greenland tariffs last week after he had a meeting with the Secretary General of NATO. The threats of punitive U.S. tariffs on several European nations unless Greenland was sold to the United States initially triggered market volatility and caused mortgage rates to spike from near three-year lows to slightly above 6.2%. However, when the administration later canceled the tariff plans and signaled a framework for a future deal last week, markets stabilized, bond prices recovered, and mortgage rates edged slightly lower, though they remained elevated without fully restoring prior lows.

New home sales ramp up in September and October: A delayed report on new home sales indicates a surge in new residential sales in September and October, as lower rates and builders’ incentives pushed housing demand higher. While the number of new homes sold stayed relatively flat between September and October, sales increased 18.7% year-over-year in October and were the second highest since May 2023, following just September 2025. Lower mortgage rates and heavy builder incentives/discounts were the reasons for the leap in sales. At the regional level, new home sales had the largest yearly increase in the South (+42.1%) followed by the Midwest (+21.3%), while both the Northeast (-40%) and the West (-24.8%) dropped from their year-ago levels. The pickup in sales reduced housing inventory in September and October down to a 7.9-month supply with non-seasonally adjusted for sale units dropping to 488k units, the lowest level since last November.

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