The B&D Interview: Buddy Hughes
Buddy Hughes, 2025 Chairman of the Board for National Association of Home Builders (NAHB) reflects on a pivotal year marked by major legislative wins, rapid advances in AI adoption and shifting economic forces that will shape the industry in 2026
Builder and Developer: As the Chairman of NAHB, what were some highlights you had during your term?
Buddy Hughes: Passage of the One Big Beautiful Bill was the advocacy highlight of my year. Faced with the potential of a $4 trillion tax increase and resulting economic turmoil, NAHB focused on the need for tax stability and permanency as well as retaining favorable tax provisions that support housing production, enable greater homeownership opportunities and create affordable rental housing. Our Government Affairs team really came through and the effort showed the importance of our grass-roots advocacy.
Key elements of that bill will have a huge impact on our industry. The Tax Cuts and Jobs Act’s key provisions will be made permanent, including the tax rate structure and increased exemptions for the Alternative Minimum Tax. This blocks a $4 trillion tax increase set to take effect in 2026.
There are so many details in this measure, but the bottom line is this: This bill will be a tremendous benefit to our members and it will enable home builders to deliver more affordable homes to America’s hard-working families.
B&D: What trends have emerged in 2025 within the home building industry?
BH: The big trend in 2025 was the recognition that artificial intelligence is going to have a huge impact on the residential construction industry.
We invited Tim Costello, AI expert and CEO of Build for the Future, to talk about AI and the home building industry during NAHB’s recent Leadership Council meeting in Denver. It was eye opening. I left that meeting with a strong sense that the people who know how to use AI to address real-world challenges are going to have an outsized impact on our industry.
Our surveys indicate that roughly 20% of builders are using AI to generate advertising and marketing materials and 11% are leveraging AI to analyze markets and plan future projects. We’re not seeing it in a big way yet in finance, project scheduling or the permitting process, but I think we’ll be seeing AI used for those functions and many others, in just a few years.
We’re going to see a time of great innovation as home builders and developers embrace AI to address the housing affordability crisis and improve the home-building process.
B&D: With many builders offering price cuts, rate buy-downs and incentives, what long-term impacts do you foresee on margins, product mix or buyer expectations?
BH: Amid times of economic insecurity, buying a home becomes a different calculation for many households, especially with mortgage rates so high. And you’re right, many builders are using incentives to coax people into the market for a new home. In their research for the most recent edition of the NAHB/Wells Fargo Housing Market Index (HMI), our economists found that 41% of builders reported cutting prices in November. That’s a record high in the post-Covid period and the first time this measure has passed 40%.
Furthermore, that latest HMI survey also revealed that the average price reduction was 6% in November. The use of sales incentives was 65% in November, tying the share in September and October. All this confirms that we are in a buyer’s market and home builders are having to overcome high mortgage rates and buyer concerns about the broader economy.
As long as mortgage rates are 6% or higher, we’re likely to see reduced buyer enthusiasm for new home purchases. Our economists tell us we’re likely to see rates for a 30-year, fixed-rate mortgage at or near 6% at least through the end of 2027.
B&D: Tariffs and rising materials costs were a defining headwind in 2025. From your perspective as NAHB Chairman, how did these cost pressures shape builders’ planning and what actions did NAHB prioritize to promote greater stability and predictability in material pricing?
BH: Tariffs and tariffs expectations created a lot of confusion and made it harder for businesses – including home builders – to predict future costs. But so far they have not had a dramatic impact on the cost of lumber or other building materials. Lumber prices, for example, are not far from their lows over the last five years. That said, it is possible that we have not seen the full impact of the tariffs.
I want to point out that a couple of months ago the U.S. Commerce Department announced a 10% tariff on all timber and lumber imports and an additional 25% tariff on kitchen cabinets and furniture. Over the last six months, the Commerce Department has increased duties on Canadian lumber from 14.5% to 45%.
The United States does not produce enough softwood lumber to meet domestic demand, so it imports roughly one-third of the lumber it consumes. Imports from Canada account for nearly 85% of all U.S. lumber imports. NAHB is urging the administration to continue its efforts to increase the supply of timber from public lands in an environmentally responsible manner and to quickly enter into negotiations with Canada and other global trading partners to resolve ongoing trade issues in a fair and equitable manner that eliminates tariffs on lumber and other building materials.
B&D: What are the most important macroeconomic forces you believe will shape housing starts and builder activity heading into 2026?
BH: This is a complex question, because there are a lot of moving parts in the economy right now. On the one hand, we have a softening labor market, policy uncertainty, tariffs and the lingering effects of the longest government shutdown on record. On the other hand, the tax provisions and other fiscal matters provide a stimulative economic environment and the Federal Reserve’s three rate cuts in their final three meetings of 2025 have eased financial conditions.
I am cautiously optimistic about the outlook for housing and the economy as a whole. I think the success of the broader economy in 2026 will hinge in large part on the relative success of the residential construction industry.
This interview also appears in the January issue of Builder and Developer, read the print version here.
