The Conference Board’s Consumer Confidence Index dropped to 81.9 in September, its lowest reading since April 2014, and only 0.4% of consumers told the survey they plan to buy a newly built home in the next six months. That sounds rough for anyone with spec homes in the pipeline. But, new home sales actually rose in August. Buyers are still out there, they’re just negotiating harder, and that changes how you should plan your next spec build.
Quick takeaways
- Consumer confidence fell 6.7 points in September to 81.9, its lowest level since April 2014.
- The 30-year fixed mortgage rate hit 7.4% on October 8, the highest it’s been since November 2023.
- August new home sales rose 6.4% to a 684,000 annual pace, though the median price was down 5.8% from a year earlier.
- Spec still works in this market if you underwrite for a slower sale and a tougher negotiation.
Consumer confidence just hit a 12-year low
And very few of those consumers are shopping for new construction.
The Conference Board’s September reading dropped 6.7 points to 81.9, well under the 89.2 that economists polled by Reuters had expected. It was also the first time since September 2024 that consumers rated current business conditions as negative. Here’s how the rest of the survey shook out, per NAHB’s breakdown.
- Overall Consumer Confidence Index – 81.9, the lowest since April 2014
- Present Situation Index – 109.3, the lowest since February 2021
- Expectations Index – 63.6, the lowest since April 2025
- Planning to buy a home within six months – 5.4% of respondents
- Planning to buy a newly constructed home – 0.4% of respondents
The 0.4% figure is the one spec builders should pay attention to. Of the 5.4% of consumers planning to buy a home, fewer than one in ten have their minds set on new construction. Another 2.6% haven’t decided between new and existing yet, and those are the buyers your pricing and incentives need to win.
A lot of that pessimism traces back to rates. Freddie Mac’s 30-year fixed averaged 7.4% as of October 8, its seventh straight weekly increase and the highest level since November 2023. A year ago it was 6.3%. We noted the move back above 7% in our last post, and it’s kept climbing every week since. Purchase mortgage applications in September were down 11.6% from a year earlier, according to MBA data analyzed by NAHB.
Builders have already started to pull back. Spending on new single-family construction was down 3.5% year over year in August, per Census data analyzed by NAHB.
Buyers are still out there
They’re just driving a harder bargain than they were a year ago.
Here’s the part that doesn’t line up with the confidence numbers. New home sales rose 6.4% in August to a 684,000 annual pace, per the Census Bureau. Census notes its margin of error on that monthly jump is wide, and sales are still 2% below where they were in August 2025, but that’s a long way from buyers disappearing.
What changed is how much it takes to get them to sign. The median new home sold for $393,700 in August, 5.8% less than a year earlier. In NAHB’s September builder survey, 38% of builders cut prices, and the average cut held at 6% for the sixth month in a row. Two-thirds used sales incentives, the highest share since December. On a median-priced new home, a 6% cut works out to about $23,600.
If you build spec, your exposure right now comes down to how much margin you give up to close and how long a finished house sits before someone signs.
Every month a finished spec home sits costs you
Spec financing already runs higher, and finished homes are taking longer to sell.
Spec loans were already the more expensive option heading into the fall. NAHB’s Q2 2026 AD&C Financing Survey put the average effective rate on speculative single-family construction loans at 11.82%, up from 11.22% in the first quarter, while pre-sold construction loans averaged 11.67%. The effective rate includes upfront points, which hit harder on a loan that’s typically paid off in well under a year.
The bigger issue is time. New homes that sold in August had been sitting finished for a median 3.2 months, up from 2.4 months a year earlier, according to the Census Bureau. There’s 8.5 months of new home supply at the current sales pace, and 112,000 completed homes were still waiting on buyers at the end of August.
Run the numbers on a fully drawn $350,000 spec loan at 7.28%, the Q2 average contract rate for spec construction in that same NAHB survey. Interest alone comes to about $2,120 a month. Sit for the median 3.2 months after completion and that’s roughly $6,800, compared with about $5,100 at last year’s 2.4-month median. That’s before taxes and insurance, and before whatever price cut it takes to close. It’s also based on Q2 pricing, which came before the Fed raised its benchmark rate in September for the first time since 2023.
What this means for your next spec build
Plan for a slower sale before you break ground.
Spec can still pencil out in this market, as long as your pro forma assumes the buyer you’re actually going to get. A few things worth building into every spec deal for the rest of 2026.
- Phase your starts. Releasing homes in smaller batches lets you match starts to what’s actually selling in your submarket, so a slow stretch doesn’t leave you carrying a full phase of finished inventory.
- Pre-sell part of every project. Pre-sold loans carried a slightly lower effective rate than spec in Q2, and every home under contract before completion is one less house racking up interest while it waits.
- Price for where buyers are. About half of August’s new home sales were priced between $300,000 and $499,999, and 22% sold for under $300,000, per the Census Bureau. If your spec pricing lands well above your market’s median, double-check your absorption assumptions.
- Budget for incentives up front. With two-thirds of builders offering them, a rate buydown or closing-cost credit is a normal part of the deal now, and it’s a lot easier on your margin when it’s already in the pro forma.
- Size your interest reserve for a slower sale. Finished homes are taking a median 3.2 months to sell, so if your numbers assume a quick sale, rerun them at three or four months and see whether the deal still works.
- Give buyers an ARM option. The 5/1 ARM averaged 6.2% in September compared with 7.1% for the 30-year fixed, per MBA data. A preferred lender who offers ARMs can help a buyer on the fence qualify.
October’s consumer confidence and builder sentiment numbers come out later this month, along with September new home sales on October 27. We’ll update the picture here once they’re in.
Frequently Asked Questions
Why did consumer confidence drop in September 2026? The Conference Board’s index fell 6.7 points to 81.9 as consumers grew more pessimistic about business conditions and the job market over the next six months. The drop followed the Fed’s first rate hike since 2023.
Are people still buying new homes? Yes. New home sales rose to a 684,000 annual pace in August, though that’s still 2% below a year earlier and the median price fell 5.8%. Most builders are using incentives to close.
Is building spec riskier than building pre-sold right now? Spec loans carried a higher average effective rate than pre-sold loans in Q2, 11.82% compared with 11.67%. Finished homes are also taking longer to sell, a median 3.2 months after completion in August. Pre-selling part of a project cuts down on that exposure.
How much does it cost to carry an unsold spec home? It depends on your loan balance and rate. At 7.28% on a $350,000 balance, interest alone runs about $2,120 a month. Over the 3.2-month median that finished new homes sat before selling in August, that’s roughly $6,800 before taxes and insurance.
Building with CoFi Lending
CoFi works with builders, developers, and brokers across a wide range of markets, and we structure financing around your project’s actual timeline and exit plan. If you’re weighing your next spec start and want to talk through how a slower sales pace affects the numbers, reach out to our team.
Disclaimer: This article is for informational purposes only and does not constitute financial advice, a commitment to lend, or a guarantee of specific loan terms. Actual rates, terms, and approvals depend on individual borrower qualifications, project characteristics, and market conditions.
