Builder confidence in the market for newly built single-family homes inched up this month in the latest the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).
The September HMI reading was 41, up from 39 in August. This month’s HMI reverses four consecutive monthly declines. HMI readings over 50 indicates that more builders view conditions as good than poor.
“Thanks to lower interest rates, builders now have a positive view for future new home sales for the first time since May 2024,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kansas. “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.”
All three HMI indices were up in September. The index charting current sales conditions rose one point to 45, while the component measuring sales expectations in the next six months increased four points to 53 and the gauge charting traffic of prospective buyers recorded a two-point uptick to 27.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell three points to 49, the Midwest was one point higher to 40, the South was one point lower to 41 and the West increased two points to 39.
“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,” said NAHB Chief Economist Robert Dietz. “Lowering the cost of construction is critical to confront persistent challenges for housing affordability.”
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