Builder confidence in the new single-family home market moved higher for the second month in a row in October as easing inflation and expectations for mortgage rates boosted optimism, the National Association of Home Builders (NAHB) reported.
The NAHB/Wells Fargo Housing Market Index rose two points to 43 in October. Courtesy of the National Association of Home Builders.
Specifically, the NAHB/Wells Fargo Housing Market Index (HMI) rose two points to 43. Any number over 50 indicates that more builders view conditions as “good,” rather than “poor.”
The share of builders reducing home prices was flat at 32%, NAHB said, adding that the average price reduction returned to the long-term trend of 6% after sliding to 5% in September. The use of sales incentives rose one percentage point to 62%.
The HMI is made up of three components, all of which gained ground in October. The component gauging current sales conditions rose two points to 47, the gauge measuring sales expectations in the next six months rose four points to 57, and the component measuring traffic of prospective buyers rose two points to 29.
“While housing affordability remains low, builders are feeling more optimistic about 2025 market conditions,” NAHB Chairman Carl Harris said. “The wild card for the outlook remains the election, and with housing policy a top-tier issue for candidates, policymakers should be focused on supply-side solutions to the housing crisis.”
The three-month moving average for regional HMI scores was up in three of four regions, rising two points in the Northeast to 51, two points in the Midwest to 41 and three points in the West to 41. It was flat at 41 in the South.
“While homebuilders are becoming more cautiously optimistic, with more rate cuts expected as soon as this quarter, it’s important to remember their enduring challenges,” CoreLogic Chief Economist Selma Hepp said. “For example, the price of building materials is increasing again, following a period of dropping after the pandemic, with Miami and Dallas leading the way in spiking construction costs. That said, home sales expectations are growing, so homebuilders can confidently anticipate property demand will outstrip supply for years to come.”