HousingWireHousingWire
Cooling inflation and a steady job market are giving homebuilders a sense of optimism when it comes to mortgage rates, leading to an uptick in homebuilder confidence, according to data published on Thursday.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) rose two points month over month to a reading of 43 in October. This is the second consecutive month of increases in builder sentiment after three straight months of decline.
Although builders are more optimistic about the future, they are still dealing with consumer affordability challenges, reflected in the share of builders cutting prices holding steady at 32% in October. Additionally, the average price reduction jumped back up to 6%, after dropping to 5% in September, while the use of sales incentives inched up to 62%, compared to 61% a month prior.
“While housing affordability remains low, builders are feeling more optimistic about 2025 market conditions,” Carl Harris, a NAHB chairman, said in a statement. “The wild card for the outlook remains the election, and with housing policy a top tier issue for candidates, policymakers should be focused on supply-side solutions to the housing crisis.”
Additionally, the NAHB reported that homebuilders’ gauge of current sales conditions rose two points to 47. The gauge measuring traffic of prospective buyers also posted a two-point gain to 29, while the component charting sales expectations over the next six months jumped four points to 57.
The three-month moving averages for the HMI rose month over month in three of the four regions tracked by the index, with the West gaining three points to a reading of 41, the Northeast rising by two points to 51, and the Midwest jumping up two points for a reading of 41. Meanwhile, the South held steady at a reading of 41.
Although builders see the easing of interest rates by the Federal Reserve as a good thing for the market, the NAHB’s chief economist Robert Dietz, does not expect lower rates to solve all of the industry’s issues.
“Despite the beginning of the Fed’s easing cycle, many prospective home buyers remain on the sideline waiting for lower interest rates,” Dietz said in a statement. “We are forecasting uneven declines for mortgage interest rates in the coming quarters, which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans.”
