Washington, D.C.—Builder sentiment levels held steady in September, but lower mortgage rates and expectations of an upcoming Federal Reserve rate cut lifted future sales expectations, 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 was 32 in September, unchanged from August. Sentiment has hovered between 32 and 34 since May. Builders expressed optimism that easing interest rates could bring buyers back to the market in the fourth quarter.
“While builders continue to contend with rising construction costs, a recent drop in mortgage interest rates over the past month should help spur housing demand,” said NAHB chairman Buddy Hughes, a home builder and developer from Lexington, N.C.
NAHB chief economist Robert Dietz added: “NAHB expects the Fed to cut the federal funds rate at their meeting this week, which will help lower interest rates for builder and developer loans. Moreover, the 30-year fixed rate mortgage average is down 23 basis points over the past four weeks to 6.35%, per Freddie Mac. This is the lowest level since mid-October of last year and a positive sign for future housing demand.”
Despite the optimism, the market remains soft. In September, 39% of builders reported cutting prices, up from 37% in August and the highest share since the pandemic. The average price cut was 5%, a level consistent since last November. Sales incentives were reported by 65% of builders, essentially unchanged from 66% in August.
The HMI is based on a monthly survey of builder perceptions of sales and traffic. It has been conducted for more than 40 years. A score above 50 indicates more builders view conditions as good than poor.
In September, the index measuring future sales expectations rose two points to 45, the highest level since March. The index gauging current sales conditions held steady at 34, while prospective buyer traffic slipped one point to 21.
Regionally, the three-month moving averages showed the Northeast steady at 44 and the Midwest up one point to 42. The South was unchanged at 29, and the West rose one point to 26.
HMI tables are available at nahb.org/hmi.