Homebuilder Confidence Edges Higher Despite Affordability Headwinds
(Illustration courtesy National Association of Home Builders. Inset courtesy of Jeff Cave)
With inflation gradually easing and builders anticipating mortgage rates will moderate, builder sentiment moved higher for a second consecutive month, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
Builder confidence in the market for newly built single-family homes equaled 43 in October, up two points from September’s reading.
“While housing affordability remains low, builders are feeling more optimistic about 2025 market conditions,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan.
NAHB Chief Economist Robert Dietz noted many prospective home buyers remain on the sidelines waiting for lower interest rates despite the beginning of the Fed’s easing cycle. “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,” he said.
The latest Housing Marker Index survey also revealed that the share of builders cutting prices held steady at 32% in October, the same rate as last month. Meanwhile, the average price reduction returned to the long-term trend of 6% after dropping to 5% in September. The use of sales incentives was 62% in October, slightly up from 61% in September.
The NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “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.” All three indexes were up in October. The index charting current sales conditions rose two points to 47, the component measuring sales expectations in the next six months increased four points to 57 and the gauge charting traffic of prospective buyers posted a two-point gain to 29.
