There was a new rush of optimism in the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), which found builder confidence at a 37 level, up five points from September and the highest reading since April. Readings over 50 indicates that more builders view conditions as good than poor.
“The HMI gain in October is a positive signal for 2026 as our forecast is for single-family housing starts to gain ground next year,” said NAHB Chief Economist Robert Dietz. “The 30-year fixed-rate mortgage fell from just above 6.5% at the start of September to 6.3% in early October. Combined with anticipated further easing by the Fed, builders expect a slightly improving sales environment, albeit one in which persistent supply-side cost factors remain a challenge.”
Dietz noted this upswing in confidence came despite the ongoing federal government shutdown and an expectation of no Census housing construction data for September being published this week.
“Based on modeling of historical data, the October increase for the HMI suggests an approximate 3% increase for the September single-family permit data on a seasonally adjusted annual rate basis,” he said. “Our model suggests a 2% to 4% range for the increase based on the statistical relationship.”
All the HMI subindices rose in October. The component measuring current sales conditions increased four points to 38, the index gauging future sales surged by nine points to 54, and the gauge charting traffic of prospective buyers posted a four-point gain to 25.
Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 46, the Midwest was unchanged at 42, the South increased two points to 31. and the West gained two points to 28.
However, the latest HMI survey also found that 38% of builders reported cutting prices in October while the average price reduction rose to 6% after averaging 5% for several months previously. The last time builders reduced prices by 6% was a year ago in October 2024. The use of sales incentives was 65% in October, unchanged from September.
“While recent declines for mortgage rates are an encouraging sign for affordability conditions, the market remains challenging,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, North Carolina. “The housing market has some areas with firm demand, including smaller builders shifting to remodeling and ongoing solid conditions for the luxury market. However, most home buyers are still on the sidelines, waiting for mortgage rates to move lower.”
