Builder sentiment increased from 39 in August to 41 in September, breaking a four-month streak of declines; anything below 50 is considered negative for the National Association of Home Builders’ monthly survey, according to NAHB. It reached a record high of 90 in November 2020.
All three components of the homebuilder index increased, with current sales conditions climbing one point to 45; buyer traffic increasing two points to 27; and sales expectations in the next six months rising four points to 53.
Homebuilding sentiment reportedly increased in part because mortgage rates declined by more than half a percentage point from early August through mid-September.
Thirty-two percent of builders reported cutting prices in September, which is down from 33% in August—the first decrease since April. The average price discount fell from 6% to 5%, which is the first time it has been below 6% since July 2022. Sixty-one percent of builders were using sales incentives other than price cuts to improve sales in September compared with 64% in August.
“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. “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.”
