Home builder sentiment increased for the first time in four months in September, buoyed by a dip mortgage rates, as per the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
Builder confidence in the market for newly built single-family homes was at a score of 41 in September, up two points from a reading of 39 in August.
“Thanks to lower interest rates, builders now have a positive view for future new home sales for the first time since May 2024,” says Carl Harris, chairman off NAHB, in a statement. “However, the cost of construction remains elevated relative to household budgets, holding back some enthusiasm for current housing market conditions. Moreover, builders will face competition from rising existing home inventory in many markets as the mortgage rate lock-in effect softens with lower mortgage rates.”
“With inflation moderating, the Federal Reserve is expected to begin a cycle of monetary policy easing this week, which will produce downward pressure on mortgage interest rates and also lower the interest rates on land development and home construction business loans,” says Robert Dietz, chief economist for NAHB. “Lowering the cost of construction is critical to confront persistent challenges for housing affordability.”
The latest HMI survey also revealed that the share of builders cutting prices dropped in September for the first time since April, down one point to 32%.
Moreover, the average price reduction was 5%, the first time it has been below 6% since July 2022, according to the report.
Meanwhile, the use of sales incentives fell to 61% in September, down from 64% in August.
Photo: Jens Behrmann