Builder Confidence Steady; Future Sales Expectations Rise

Builder sentiment held steady in September, even as lower mortgage rates and hopes for a Federal Reserve rate cut lifted expectations for sales. According to the latest National Association of Home Builders (NAHB) / Wells Fargo Housing Market Index (HMI), builder confidence in the market for newly built single-family homes remained at 32 in September, unchanged from August. 

Key Findings

• Future expectations brighten: The HMI component measuring expected sales over the next six months rose to 45 in September, up two points and reaching its highest level since March. 

• Current sales remain weak: The gauge for current single-family home sales held essentially flat, at a level of 34. 

• Buyer traffic is low: The prospective buyer traffic metric ticked down slightly to 21, continuing a trend of weak demand. 

• Price cuts and incentives:

  • 39% of builders reported cutting prices in September (up from 37% in August), the highest share since the post-COVID period. 

  • The average price reduction remained steady at 5%. 

  • About 65% of builders are using sales incentives, almost the same as in August (~66%). 

Regional Insights

Looking regionally (using three-month moving averages):

• Northeast stayed at 44 

• Midwest gained a point to 42 

• South remained at 29 

• West nudged up to 26 

What’s Driving This

• Mortgage rates easing: The average 30-year fixed mortgage rate has dropped about 23 basis points over the past month to around 6.35%, per Freddie Mac — the lowest since mid-October of the previous year. 

• Expectations of Fed action: Builders anticipate the Fed may cut the federal funds rate soon, which could help lower interest costs for both buyers and for builders/developers. 

• Persisting cost pressures: Though optimism is rising for future sales, builders are still dealing with elevated construction and materials costs, which squeeze margins and affordability. 

Implications & Outlook

• With expectations rising, the last quarter of 2025 may see increased activity, especially if mortgage rates continue to retreat.

• However, low buyer traffic and frequent price cuts indicate that demand remains fragile. Affordability is still a big hurdle.

• Builders may increasingly lean on incentives or discounts to move inventory.

• Markets in regions like the South and West may lag in recovering builder confidence, given that current readings are comparatively lower.

Summary

Overall, the picture is mixed. Confidence is flat, but there are signs of cautious optimism: future sales expectations are improving, and small gains in mortgage rate conditions are helping. For builders, the challenge will remain balancing cost pressures, price competitiveness, and buyer traffic. For prospective homebuyers, this could mean more favorable deals ahead—but affordability issues are still front and center.

Original material last updated from NAHB / Wells Fargo HMI report (“Builder Confidence Steady but Future Sales Expectations Hit Six-Month High”)