Builder Sentiment Rises as Rates Fall
Builder sentiment in the green and sustainable homebuilding sector has seen a modest rebound this September, buoyed by a decrease in mortgage rates. According to the latest National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), builder confidence for newly built single-family homes rose to 41, up from 39 in August. This uptick ends a four-month streak of declining confidence. NAHB Chairman Carl Harris noted that while the drop in mortgage rates has improved outlooks for future sales, high construction costs and a competitive existing home market continue to dampen enthusiasm. The Federal Reserve’s anticipated policy easing could provide further relief by lowering construction-related interest rates, a crucial factor in addressing housing affordability challenges.
In addition to rising sentiment, the HMI survey revealed a decrease in price reductions and the use of sales incentives, indicating a shift towards more stable market conditions. The share of builders cutting prices fell to 32% in September, with average reductions dropping to 5%, the lowest since July 2022. The HMI indices reflecting current sales conditions, future sales expectations, and buyer traffic all showed improvement this month. Regionally, the West saw a slight increase in confidence, while other areas experienced mixed changes. Overall, while builder sentiment is on the rise, ongoing affordability issues remain a significant concern for the industry.