Builder confidence in the market for new single-family homes improved for the second straight month in October amid easing inflation and expectations that mortgage rates will moderate in the coming months, according to the National Association of Home Builders/Wells Fargo Housing Market Index.
The index tracking the market for new single-family homes increased two points to 43 this month from 41 in September. The index tracking current sales conditions increased two points to 47, while the component measuring sales expectations in the next six months increased four points to 57. The gauge tracking traffic of prospective buyers increased two points to 29. Any number over 50 shows more builders view conditions as good rather than poor.
“While housing affordability remains low, builders are feeling more optimistic about 2025 market conditions,” said NAHB Chair Carl Harris. “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 share of builders reducing prices remained at 32 percent in October, according to the report. The average price reduction returned to the long-term trend of 6 percent after falling to 5 percent in September. The use of sales incentives increased to 62 percent this month from 61 percent in September.
“Despite the beginning of the Fed’s easing cycle, many prospective homebuyers remain on the sideline waiting for lower interest rates,” said NAHB Chief Economist Robert Dietz. “We are forecasting uneven declines for mortgage interest rates in the coming quarters, which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans.”
Single-family authorizations increased 0.3 percent to 970,000 from 967,000 in August, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. Privately-owned housing units authorized by building permits fell nearly 3 percent in September to 1.428 million from 1.47 million the previous month.
Other September report findings included:
- Privately-owned housing starts fell a half-percent to 1.354 million in September from 1.361 million in August. Privately-owned housing completions fell 5.7 percent to 1.680 million from 1.781 million in August, but remained 14.6 percent higher than the September 2023 rate of 1.466 million.
- Single-family housing starts increased 2.7 percent to 1.027 million in September from 1 million in August. Single-family housing completions fell 2.7 percent to 1 million from 1.028 million.