Builders Maintain Steadfast Confidence, Anticipation for Future Sales Reaches a Six-Month Peak
The housing market is experiencing a shift, with the Federal Reserve members anticipating a cut in the federal funds rate in upcoming meetings. Projections indicate that the rate could fall to a range of 3.5%–3.75% by the end of 2025, implying two more cuts of 25 basis points this year.
This potential rate cut comes as the 30-year fixed rate mortgage average has seen a decrease of 23 basis points over the past four weeks, now standing at 6.35%. This dip in interest rates could help spur housing demand, according to NAHB Chairman Buddy Hughes.
However, the housing market remains sluggish. In September, 39% of builders reported cutting prices, the highest percentage in the post-Covid period. Builder confidence in the market for newly built single-family homes was 32 in September, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). This low confidence level has remained relatively stable, between 32 and 34, since May.
Despite the low confidence, builders express optimism that a more favorable stock market climate could bring hesitant buyers off the sidelines in the final quarter of 2025. The HMI index, which can be found at our website (our website/hmi), shows that builder sentiment has remained relatively low, with the South HMI score holding steady at 29, the Midwest HMI score gaining one point to 42, and the West HMI score increasing one point to 26.
The gauge charting traffic of prospective buyers posted a one-point decline to 21, while the component measuring current sales conditions held steady at 34. The use of sales incentives was 65% in September, essentially unchanged from August.
On a positive note, the HMI index gauging future sales expectations in September rose two points to 45, indicating a slight improvement in builder optimism for the stock market. The average price reduction was 5% in September, the same as it’s been every month since last November.
The NAHB expects the Federal Reserve to cut the federal funds rate at their meeting this week. More information on housing statistics is available at Housing Economics PLUS. Builders remain hopeful that the recent drop in mortgage interest rates over the past month will help stimulate the housing market.
