U.S. homebuilders grew more optimistic about future sales even as overall confidence in the new-home market held flat in September, with easing mortgage rates and expectations of imminent Federal Reserve rate cuts offering a glimmer of relief for a sluggish sector.
The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) registered 32 in September, unchanged from August and well below the breakeven level of 50, according to data released this week. Sentiment has been stuck in the low-30s since May, reflecting weak demand amid affordability pressures.
Still, forward-looking expectations improved. The HMI subindex tracking builders’ six-month sales outlook rose two points to 45, the highest since March, as mortgage rates declined and bets grew that the Fed will begin cutting its benchmark rate this week.
“While builders continue to contend with rising construction costs, a recent drop in mortgage interest rates should help spur demand,” said NAHB Chairman Buddy Hughes.
The average 30-year fixed mortgage rate fell 23 basis points over the past month to 6.35%, its lowest since October 2024, according to Freddie Mac. NAHB Chief Economist Robert Dietz said the decline, combined with an expected Fed move, should also ease borrowing costs for builders and developers.
Signs of ongoing strain remain clear. Nearly four in ten builders reported price cuts in September–the highest share since the pandemic–while 65% offered sales incentives. The average price reduction was 5%, a level unchanged since last November.
The index measuring current single-family home sales held steady at 34, while the gauge of prospective-buyer traffic slipped to 21.
Regionally, the Northeast held at 44, the Midwest edged up to 42, the South was steady at 29, and the West climbed to 26.
The HMI, based on a monthly survey of builders conducted for more than four decades, reflects conditions for newly built, single-family homes. Readings above 50 signal that more builders view market conditions as favorable rather than poor.
