Stronger expectations for future sales conditions helped boost builder confidence to its highest level since April, according to the NAHB/Wells Fargo Housing Market Index (HMI). Builder confidence in the market for newly-built single-family homes registered a reading of 37 in October, up five points from September.
“While recent declines for mortgage rates are an encouraging sign for affordability conditions, the market remains challenging,” said NAHB chairman Buddy Hughes. “The housing market has some areas with firm demand, including smaller builders shifting to remodeling and ongoing solid conditions for the luxury market. However, most home buyers are still on the sidelines, waiting for mortgage rates to move lower.”
NAHB chief economist Robert Dietz said builders expect a better sales environment in the future based on cooling rates and expectations of further easing by the Federal Reserve.
“Based on modeling of historical data, the October increase for the HMI suggests an approximate 3% increase for the September single-family permit data on a seasonally adjusted annual rate basis,” Dietz added, given there is not expected to be a publication of housing construction data for September this week.
The latest HMI survey found 38% of builders cut prices in October, with an average price reduction of 6%. The use of sales incentives was 65% in October, unchanged from September.
The HMI gauges builder perceptions of current sales and sales expectations for the next six months on a scale of “good,” “fair,” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Scores are used to calculate a seasonally adjusted index where any number over 50 indicates more builders view conditions as good than poor.
The component measuring current sales conditions increased four points to 38 and the index tracking the traffic of prospective buyers posted a four-point gain to 25. The component gauging future sales jumped nine points to 54, the first time this index surpassed the 50-point breakeven marker since January 2024.
