Builders see hope for the future as mortgage rates fall
Builder confidence remained low in September, according to the NAHB — but many are optimistic that declining mortgage rates will bring buyers back.
If the Federal Reserve decides to cut interest rates this week, builder confidence could rebound — but for now, confidence remains low as builders struggle with rising material costs.
Builder confidence held steady in September, according to the National Association of Home Builders. The association's Housing Market Index (HMI), which measures the health of the new home market, has stayed at 32 or 33 throughout the summer — the lowest level in three years.
Hope for late 2025? One reason for the pessimism is the way builders are reacting to weak demand. According to the NAHB's latest survey, 39% of builders cut prices in the past month, the highest share in the post-pandemic era, noted Robert Dietz, chief economist at the NAHB.
"While builder sentiment has hovered at a relatively low reading between 32 and 34 since May, builders expressed optimism that a more favorable interest rate climate could bring hesitant buyers off the sidelines in the final quarter of 2025," Dietz said.
Rates continue to drop: Mortgage rates continue to decline significantly heading into the Federal Reserve's Sept. 17 decision on short-term interest rates. The average 30-year fixed-rate mortgage was 6.13% on Sept. 16, according to Mortgage News Daily, down from 6.59% a month ago.
The recent drop in mortgage rates is giving builders some hope that things may begin turning around. The index gauging future sales expectations in September rose two points to 45 compared to August — the highest reading since March.
Optimism highest in the Northeast: Builders in the Northeast continue to remain most optimistic about the construction industry, scoring 44 on the NAHB's latest HMI. The West had the lowest index score at 26.