Builder confidence remained stable in September, but lower mortgage rates and anticipation that the Federal Reserve will shortly drop the federal funds rate contributed to increased future sale estimates in the coming months.
The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), issued today, showed that builder confidence in the market for newly built single-family homes was 32 in September, unchanged from the previous month.
While builder morale has been relatively low between 32 and 34 since May, builders expressed optimism that a more favorable interest rate environment will entice cautious purchasers off the sidelines in the fourth quarter of 2025.
The NAHB anticipates that the Fed will drop the federal funds rate at its meeting this week, lowering interest rates on builder and developer loans.
Furthermore, the 30-year fixed rate mortgage average has dropped 23 basis points in the last four weeks, to 6.35%, according to Freddie Mac.
This is the lowest level since mid-October last year, which bodes well for future house demand.
In a reminder that the housing market remains depressed, the current HMI poll also found that 39% of builders reported price cuts in September, up from 37% in August and the biggest level since Covid.
Meanwhile, the average price drop in September was 5%, as it has been every month since last November. In September, sales incentives were used at 65%, which was nearly identical to 66% in August.
The NAHB/Wells Fargo HMI, derived from a monthly survey that NAHB has been conducting for more than 40 years, 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 prospective buyer traffic as “high to very high,” “average,” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over.
In September, the HMI indicator measuring future sales forecasts increased by two points to 45, its best score since March of this year.
The component assessing current sales circumstances remained unchanged at 34, while the gauge charting prospective buyer traffic dropped one point to 21.
Looking at the three-month moving averages for regional HMI scores, the Northeast remained same at 44, the Midwest grew one point to 42, the South remained constant at 29, and the West increased one point to 26.
You may find the HMI tables at nahb.org/hmi.
[Read more about this topic on Eyeonhousing.org]