Steady builder confidence, yet future sales anticipations reach a six-month peak
Housing Market Remains Soft, but Builders Remain Optimistic
The housing market has shown some mixed signals in recent times, according to the latest Housing Market Index (HMI) survey. The National Association of Home Builders (NAHB) reported that builder confidence in the market for newly built single-family homes was 32 in September.
The HMI, which measures builder sentiment, remained relatively low, hovering between 32 and 34 since May. However, there were some positive indicators. The component measuring current sales conditions held steady at 34, indicating that builders are continuing to see some activity in the market.
The HMI gauging future sales expectations in September rose two points to 45, suggesting that builders are optimistic about the future. This optimism may be driven by the recent drop in mortgage interest rates over the past month. The 30-year fixed rate mortgage average is down 23 basis points over the past four weeks to 6.35%.
According to NAHB Chairman Buddy Hughes, this drop in mortgage interest rates should help spur housing demand. This is good news for a market that has been soft, as revealed by the latest HMI survey.
The West HMI score increased one point to 26, while the Midwest HMI score gained one point to 42. The South HMI score remained the same at 29, and the Northeast HMI score remained unchanged at 44. However, the gauge charting traffic of prospective buyers posted a one-point decline to 21.
The Federal Reserve (Fed) is expected to lower the federal funds rate by 25 basis points at its meeting on September 17, 2025, with market odds for a cut at over 90% and experts confirming this expectation based on recent economic data and Fed signals. This move is expected to further lower mortgage rates, potentially boosting the housing market.
Despite the soft market, builders are expressing optimism that a more favorable interest rate climate could bring hesitant buyers off the sidelines in the final quarter of 2025. This optimism is reflected in the use of sales incentives, which was 65% in September, essentially unchanged from 66% in August.
However, there are signs that the market is still challenging. In September, 39% of builders reported cutting prices, which is the highest percentage in the post-Covid period. The average price reduction was 5% in September, the same as it's been every month since last November.
More information on housing statistics is available at Housing Economics PLUS, and the HMI index can be found at our website/hmi. For more insights on the housing market, visit the NAHB website.
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