Even while builders continue to face market and macroeconomic uncertainty, mood increased significantly in October, with future sales estimates above the 50-point breakeven barrier for the first time since January.
According to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built single-family homes increased by five points in October, reaching its highest level since April.
The HMI increase in October is a good omen for 2026, as the NAHB predicts that single-family housing will begin to gain ground next year.
The 30-year fixed-rate mortgage dropped from little over 6.5% at the beginning of September to 6.3% in early October.
With the Fed’s projected additional easing, builders foresee a slightly improved sales environment, albeit one in which persistent supply-side cost concerns remain a challenge.
While recent cuts in mortgage rates are a positive indication for affordability, the market remains difficult.
Some segments of the housing industry are experiencing strong demand, such as smaller builders transitioning to remodeling and the luxury market remaining strong. However, many prospective home buyers are still waiting for mortgage rates to fall.
With the government shutdown now in effect and no Census house construction statistics expected to be provided this week, our analysis provides a perspective on September permits.
According to historical data modeling, the October HMI increase predicts a 3% increase in September single-family permit data on a seasonally adjusted annual rate basis. Based on the statistical link, the model forecasts a 2% to 4% growth.
In a reminder of the housing market’s persistent troubles, the most recent HMI survey also found that 38% of builders cut prices in October.
Since June, this percentage has been between 37% and 39%. Meanwhile, the average price decrease increased to 6% in October, up from 5% in previous months.
The last time builders decreased prices by 6% was in October 2024, one year ago. In October, sales incentives were used at 65%, which remained unchanged from September.
The NAHB/Wells Fargo HMI is based on a monthly poll that NAHB has been conducting for over 40 years. It assesses builder perceptions of current single-family home sales and sales projections for the next six months as “good,” “fair,” or “bad.”
In addition, the study asks builders to rank prospective buyer traffic as “high to very high,” “average,” or “low to very low.”
The scores for each component are then used to produce a seasonally adjusted index, with any value more than 50 indicating that more builders consider conditions to be favorable rather than poor.
October saw an increase in all HMI subindices. The component evaluating current sales circumstances rose four points to 38, the index estimating future sales gained nine points to 54, and the gauge charting prospective buyer traffic rose four points to 25.
According to the three-month moving averages for regional HMI scores, the Northeast improved two points to 46, the Midwest remained constant at 42, the South increased two points to 31, and the West increased two points to 28. The HMI tables can be obtained on nahb.org/hmi.
[Read more about this topic on Eyeonhousing.org]